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1. (Total Fixed Costs) / (Unit Price - Variable Cost) is the definition of:
   • A. Total Revenue INCORRECT Total Revenue is the product of price and quantity sold   (Price X Quantity Sold).
   • B. Total Costs INCORRECT Total Costs is the sum of total fixed costs and total variable costs.
   • C. Unit Costs INCORRECT Unit costs are variable costs -- any cost that increases every   time an additional unit is made.  (This is not entirely   correct statement, but close enough for our purposes.)
   • D. Break Even Point CORRECT Note that the denominator in the equation above can be thought   of something like the "profit per unit" -- the   correct name is "unit contribution toward fixed   costs and profits" Unit Contribution is how much revenue we are getting   above our cost to make each unit.  That "per   unit profit" can then be used toward paying off fixed   costs."  When these fixed expenses have been   paid, any additional sales yield profit."
2. One reason that marketers calculate break even is:
   • A. they often cannot make a forecast. CORRECT Let's say you are in the business of selling hair dryers.  You   shrink wrap, say, a $10 brush with each hair dryer on the   expectation that this will motivate some people to make   the decision to purchase your brand.  So you spend,   say, $10,000 to shrink wrap a hairbrush on 1000 units.   You cannot forecast how many additional hair dryers you   will sell, even though you know that you will sell more. You can, however, determine how many you would have to   sell in order to cover the additional cost of the promotion. If you believe that the promotion would indeed result that   many additional units to be sold, then go ahead with the   promotion.  If you think that the promotion would   not yield that much additional sales, then the promotion   is not a good investment.
   • B. Answer A is correct. CORRECT