Question 1

CPM/PERT logic: A dummy activity becomes critical when its earliest start equals its latest finish. Is this statement correct?

Accepted Answer

Introduction / Context: Dummy activities in Activity-on-Arrow (AOA) networks have zero duration and exist only to preserve logical relationships. Understanding when any activity (including a dummy) is “critical” requires correct use of early/late times and float definitions. Given Data / Assumptions: For any activity with duration d, EF = ES + d and LS = LF - d. Total float TF = LS - ES = LF - EF. Critical activities have TF = 0, i.e., ES = LS and EF = LF. Concept / Approach: A dummy has d = 0, hence EF = ES and LS = LF. It lies on the critical path only if ES = LS (equivalently EF = LF). The statement compares ES to LF (earliest start to latest finish), which is not the criterion for criticality. ES equal to LF is neither necessary nor sufficient to establish TF = 0. Step-by-Step Solution: Write EF = ES + 0 and LS = LF - 0 for a dummy.Compute TF = LS - ES = LF - EF.Critical if and only if ES = LS (or EF = LF).Note that ES = LF is unrelated to TF unless additional equalities hold. Verification / Alternative check: Construct a small network where a dummy connects two critical events; you will find ES = LS and EF = LF, not ES = LF. Why Other Options Are Wrong: Marking the statement as “Correct” misapplies the definition of criticality. Common Pitfalls: Mixing early and late times across different ends of an activity; forgetting that zero duration does not change the logic for float conditions. Final Answer: Incorrect

Question 2

In facilities planning, a “process layout” (also called a functional layout) groups similar machines together. Which drawbacks typically arise in such a layout? Choose the most complete statement.

Accepted Answer

Introduction / Context: Process layout (functional layout) is common in job shops where varied products follow different routes. While flexible, it introduces challenges in material movement and control. This question checks understanding of the typical disadvantages. Given Data / Assumptions: Machines are grouped by function (e.g., all lathes together, all drills together). Product mix is diverse; routings differ across jobs. Objective is to identify drawbacks inherent to this layout type. Concept / Approach: Because similar resources are clustered, jobs crisscross the shop floor to complete different process steps. This increases travel distance, back-tracking, queueing variability, and makes coordination harder versus line layouts. Step-by-Step Solution: Link “functional grouping” to long, non-linear flow paths.Recognise the consequences: higher handling cost and back-tracking.Acknowledge PPC complexity: routing and scheduling grow harder in a high-variability environment.Production control cost rises due to more expediting and work-in-process monitoring. Verification / Alternative check: Classic operations texts compare process vs. product layouts: process layout scores high on flexibility, low on material handling simplicity and control ease. Why Other Options Are Wrong: (a), (b), (c) each highlight one drawback; the most complete choice is the combination. Common Pitfalls: Confusing process layout with cellular or product layout, which shorten flows and simplify control. Final Answer: All of the above

Question 3

Inventory control: What is the most important overarching function of an inventory control system in a manufacturing organisation?

Accepted Answer

Introduction / Context: Inventory control balances service level and cost by ensuring the right material, in the right quantity and condition, at the right time and place. Effective control spans systems, operations, and technical stewardship. Given Data / Assumptions: A formal stock control system is in place (records, reorder rules, counts). Central stores manage receipts, storage, and issues. Quality/technical fitness of materials must be maintained. Concept / Approach: Inventory control is not just “counting.” It integrates policy (stock control system), execution (storekeeping efficiency), and technical responsibility (condition, identification, shelf-life). A complete function therefore includes all listed elements. Step-by-Step Solution: Identify core pillars: policy, process, and product condition.Map options: (a) = policy/system; (b) = operational execution; (c) = technical oversight.Combine to reflect the comprehensive scope. Verification / Alternative check: Standard materials management frameworks emphasise ABC/VED policies, accurate records, efficient stores layouts, and inspection/quality responsibility. Why Other Options Are Wrong: Picking only one pillar underestimates the function’s breadth; all three are integral. Common Pitfalls: Over-focusing on record accuracy while neglecting physical control and quality status (e.g., corrosion, obsolescence). Final Answer: All of the above

Question 4

Linear programming basics: A “feasible solution” to an LP model must do which of the following?

Accepted Answer

Introduction / Context: In linear programming (LP), we distinguish between feasible solutions and optimal solutions. Many candidate solutions can be feasible; only one (or more) is optimal. Given Data / Assumptions: Standard LP with linear objective and linear constraints. Decision variables are subject to non-negativity (x ≥ 0). Feasibility precedes optimality in the solution process. Concept / Approach: A feasible solution is any assignment of decision variables that satisfies every constraint simultaneously, including non-negativity, regardless of the objective value. Optimality is evaluated only among feasible solutions. Step-by-Step Solution: List all constraints (equalities/inequalities) and non-negativity for variables.Check whether a candidate vector satisfies each constraint.If all are satisfied, the point is feasible; otherwise, infeasible. Verification / Alternative check: Graphical LP for two variables shows the feasible region (intersection of half-planes). Any point within/on the boundary meets constraints and non-negativity. Why Other Options Are Wrong: (a) ignores non-negativity; (b) confuses feasibility with optimality; (d) ignores structural constraints. Common Pitfalls: Believing the best objective value at an infeasible point is meaningful; it is not. Final Answer: Satisfy all constraints and meet non-negativity restrictions

Question 5

Project management: In general practice, is PERT preferred over CPM for project evaluation when activity times are uncertain (e.g., R&D, new product development)?

Accepted Answer

Introduction / Context: PERT (Program Evaluation and Review Technique) and CPM (Critical Path Method) are network-based planning tools. Their suitability depends on the nature of activity durations. Given Data / Assumptions: Pertinent context: uncertain activity times (e.g., R&D). PERT uses three-time estimates; CPM commonly assumes deterministic times. Goal is project evaluation in the presence of uncertainty. Concept / Approach: PERT models uncertainty via optimistic, most likely, and pessimistic times to compute expected durations and variance. This supports probabilistic completion analysis. CPM, while powerful for cost–time trade-offs with known times, is less suited for high uncertainty without modification. Step-by-Step Solution: Identify project type: uncertain durations → choose PERT.Use three estimates to compute expected time: te = (to + 4tm + tp) / 6.Evaluate critical path and project completion probability using variances. Verification / Alternative check: Standard PM references recommend PERT for research or novel endeavours with variability in task times. Why Other Options Are Wrong: “No” would ignore PERT’s core strength: handling uncertain durations for evaluation. Common Pitfalls: Using single-point estimates in highly uncertain environments; neglecting variance aggregation along the critical path. Final Answer: Yes

Question 6

Queuing theory: Which distribution most commonly models service time for basic M/M/1-type systems?

Accepted Answer

Introduction / Context: In queuing models, assumptions about arrival and service processes determine tractability. The classic M/M/1 model assumes memoryless behavior for both arrivals and service. Given Data / Assumptions: Basic single-server queue with Markovian arrivals and service. Arrivals follow Poisson process. Service times are independent and identically distributed. Concept / Approach: Poisson arrivals imply exponentially distributed interarrival times. For the M/M/1, service times are also exponentially distributed (memoryless). Normal distribution is unsuitable because it can yield negative times; Erlang is used in M/Ek/1 variants but not the basic M/M/1. Step-by-Step Solution: Recognise “M/M/1” → Markovian/Markovian/Single.Markovian = exponential distribution for time between events.Conclude service time law = exponential. Verification / Alternative check: Derivations of steady-state metrics (L, Lq, W, Wq) rely on the memoryless property of exponential service. Why Other Options Are Wrong: Normal can be negative; Poisson describes counts, not service durations; Erlang is a generalisation but not the default “M”. Common Pitfalls: Confusing Poisson (arrivals) with exponential (service time/interarrivals). Final Answer: Exponential law

Question 7

Time study in industrial engineering is used primarily to achieve which set of outcomes?

Accepted Answer

Introduction / Context: Time study converts observed work into fair standards. These standards drive planning, costing, capacity, and incentive systems, making time study foundational in industrial engineering. Given Data / Assumptions: Stable method and trained operator. Use of performance rating and allowances. Repetitive operations with measurable cycles. Concept / Approach: From observed times, compute representative time, normal time, and then standard time by adding allowances. This standard time feeds multiple downstream decisions: cost standards, man–machine charts, and incentive wage plans. Step-by-Step Solution: Observe and record multiple cycles.Compute representative time → multiply by rating to get normal time.Add allowances to obtain standard time.Use standard time to cost labour content, determine machine assignments, and set piece rates. Verification / Alternative check: IE references tie time standards directly to cost estimation, line balancing, and wage incentives. Why Other Options Are Wrong: Each single item is correct but incomplete; the most comprehensive answer is all of them. Common Pitfalls: Ignoring allowances; using non-representative samples; applying standards without method control. Final Answer: All of the above

Question 8

Applications of PERT: PERT is best suited to which of the following categories of projects?

Accepted Answer

Introduction / Context: PERT excels in environments with uncertain task durations and complex interdependencies. It supports probabilistic scheduling and risk-informed decisions across diverse projects. Given Data / Assumptions: Activities have variable durations. Network precedence is known or can be estimated. Leadership requires likely completion times and risk estimates. Concept / Approach: By using three-time estimates for each activity, PERT calculates expected times and variances, then assesses the critical path and completion probabilities. This fits R&D, campaigns, and installations where uncertainty is high. Step-by-Step Solution: Model the project network (nodes and activities).For each activity: collect to, tm, tp → compute te and variance.Identify the critical path and evaluate completion risk. Verification / Alternative check: Examples from R&D and marketing launches often use PERT to handle uncertainty and communicate schedule confidence. Why Other Options Are Wrong: Each single domain is valid; the inclusive answer acknowledges PERT’s cross-domain suitability under uncertainty. Common Pitfalls: Forgetting to update estimates as information improves; misidentifying dependencies. Final Answer: All of these

Question 9

Queuing analysis: Is it appropriate to use Monte Carlo simulation for queueing problems that resist closed-form mathematical analysis?

Accepted Answer

Introduction / Context: Many real-world queues include balking, reneging, complex service rules, or non-Markovian times. Analytical solutions may be intractable; simulation becomes the practical alternative. Given Data / Assumptions: Arrival/service processes may be general (non-exponential) or state-dependent. Networked or priority queues complicate analysis. Goal is performance estimation (e.g., waiting time, queue length, utilisation). Concept / Approach: Monte Carlo simulation samples random arrivals and services from specified distributions and tracks the system over time, estimating steady-state or transient metrics with statistical confidence. Step-by-Step Solution: Define arrival/service distributions and queue discipline.Generate random variates and simulate customer flow.Collect performance metrics and compute confidence intervals. Verification / Alternative check: When analytical formulas are unavailable, validated simulation provides accurate, decision-grade insights. Why Other Options Are Wrong: “Disagree” would deny simulation’s central role in complex queuing analysis. Common Pitfalls: Poor random number generation, inadequate warm-up, or too-short runs causing biased estimates. Final Answer: Agree

Question 10

Designing a wage incentive plan: Which factors must be considered to ensure fairness, adoption, and effectiveness?

Accepted Answer

Introduction / Context: Wage incentive plans align pay with performance. For success, they must motivate, be administratively practical, and preserve a fair earnings floor. Given Data / Assumptions: Standard times and quality requirements exist. Organisation seeks higher productivity with equity. Plan should be comprehensible and auditable. Concept / Approach: An effective plan offers meaningful incentives (so effort changes outcomes), is simple to operate (low overhead, clear rules), and includes guaranteed pay to avoid excessive earnings volatility and promote acceptance. Step-by-Step Solution: Ensure time standards are valid (basis for incentives).Define payout formula that is easy to compute and explain.Include a guaranteed base to protect workers when delays or mix changes occur. Verification / Alternative check: Compensation literature stresses motivation, fairness, and administrative feasibility as pillars of incentive plan success. Why Other Options Are Wrong: Each single factor is necessary but not sufficient; a robust plan includes all. Common Pitfalls: Complex payout rules; standards not maintained; ignoring quality and safety in pursuit of speed. Final Answer: All of these

Question 11

Network scheduling terminology (PERT/CPM): The start or completion of a task (with no duration itself) is called a(n) ________.

Accepted Answer

Introduction / Context: PERT/CPM models represent projects as networks of activities and events. Correct terminology is essential for reading and building these networks. Given Data / Assumptions: Activities consume time and possibly resources. Events (nodes) mark the start or finish of activities and have zero duration. Precedence relationships connect events via activities. Concept / Approach: In activity-on-arrow (AOA) or activity-on-node (AON) representations, the notion of a milestone (event) captures the instant a state is achieved (e.g., “foundation complete”). It has no time span; activities carry duration. Step-by-Step Solution: Identify whether the item consumes time → if yes, it is an activity.If it is an instantaneous marker of start/finish with zero duration → it is an event.Therefore, “start or completion of task” is an event. Verification / Alternative check: Network definitions: nodes/milestones/events have zero duration; arcs/activities have positive duration. Why Other Options Are Wrong: (b) Activity always has duration; (c) duration is a quantitative attribute, not an object; (d) contradicts standard definitions. Common Pitfalls: Using “activity” and “event” interchangeably; assigning duration to events. Final Answer: Event

Question 12

Quality and Manufacturing Systems: definition of process capability for a machine tool  In industrial engineering, the process capability of a machine is defined as the machine’s inherent ability to consistently achieve which of the following outcom…

Accepted Answer

Introduction / Context: Process capability is a cornerstone concept in quality engineering and manufacturing systems. It expresses how well a machine–process combination can repeatedly meet dimensional tolerances and surface finish requirements without continual adjustment. Unlike mere output rate, capability is about precision, repeatability, and conformance to specification. Given Data / Assumptions: A stable machine and process under statistical control. Specification limits exist for size, geometry, and surface finish. Normal process variation is present due to machine, tool, and material. Concept / Approach: Process capability concerns the natural spread of the process versus the allowable tolerance band. In practice, capability indices like Cp and Cpk summarize whether the machine and its process can hold tolerance consistently. Surface finish is also a capability attribute, tied to machine dynamics, tool condition, and cutting parameters. Step-by-Step Solution: Identify what “capability” measures: repeatable conformance to tolerance and finish.Recognize what it does not measure: the count of operations, speed range, or theoretical maximum throughput.Match to the option that reflects precision and conformance → maintaining a definite spectrum of tolerance and surface finish. Verification / Alternative check: Shifting throughput (units/min) does not imply capability if dimensions wander. Similarly, running many operations does not guarantee that any critical characteristic falls within spec. Capability indices directly tie to tolerance and centering. Why Other Options Are Wrong: Option (A) describes productivity, not capability. Option (B) is about routing/complexity, not precision. Option (C) concerns machine features (speed steps). Option (E) promises zero defects irrespective of variation, which is unrealistic and not the definition. Common Pitfalls: Confusing capability with capacity; ignoring process centering; assuming speed increases automatically improve capability. Final Answer: hold a definite spectrum of tolerance and surface finish

Question 13

Work-Factor (WF) / PMTS application: where is abbreviated Work-Factor data typically used?  Select the most appropriate application area(s) for Abbreviated Work-Factor (AWF) data within Predetermined Motion Time Systems.

Accepted Answer

Introduction / Context: Predetermined Motion Time Systems (PMTS) such as Work-Factor (WF) and Method-Time Measurement (MTM) provide standard times from motion data without stopwatches. Abbreviated Work-Factor (AWF) streamlines WF to estimate times quickly for broader industrial tasks. Given Data / Assumptions: AWF trades some precision for speed of estimation. Targeted at repetitive but not micro-precision tasks. Common shop-floor domains include handling, maintenance, and packing/shipping. Concept / Approach: AWF aggregates motion categories so analysts can set reasonable standards across diverse tasks. Material handling (lifting, carrying, placing), maintenance (walking, reaching, tool handling), and packing/shipping (selecting, wrapping, labeling, palletizing) all feature motions that suit AWF-level detail. Step-by-Step Solution: Identify AWF strengths: rapid estimates for varied manual tasks.Map to shop functions: handling, maintenance, and logistics involve similar motion families.Hence, AWF applies to all listed areas. Verification / Alternative check: Industrial engineering texts position AWF for broader applications beyond fine bench assembly, which may require more granular PMTS (e.g., MTM-1). Why Other Options Are Wrong: Options (A), (B), and (C) are each true but incomplete; (E) is too narrow and not typical for abbreviated data. Common Pitfalls: Using overly detailed systems where quick estimates suffice; conversely, using AWF where micro-motions dominate and precision is required. Final Answer: all of these

Question 14

Break-even chart interpretation: where is publicity (advertising) expenditure represented?  A company spends a substantial, largely time-based amount on sales publicity. In a standard break-even chart, this expenditure is depicted as belonging under…

Accepted Answer

Introduction / Context: Break-even charts separate costs into fixed and variable components to show how total cost and revenue vary with output. Understanding which expenses are fixed versus variable is essential for accurate analysis and decisions. Given Data / Assumptions: Publicity/advertising is planned and budgeted per period (e.g., per month), not per unit. Short-run production volume does not appreciably change the advertising spend. We assume classical linear cost behavior within a relevant range. Concept / Approach: Fixed costs do not vary with output in the short run. Advertising outlays, being time-based and not unit-driven, are categorized as fixed (or largely fixed). On a break-even chart, fixed cost is a horizontal line starting from a positive intercept at zero output; publicity cost is included in that baseline. Step-by-Step Solution: Identify cost behavior: advertising does not change with each extra unit produced.Classify as fixed cost.Place it under the fixed cost line on the chart; total fixed cost is the sum of such period expenses. Verification / Alternative check: Managerial accounting texts treat period marketing and administrative expenses as fixed within the relevant range, which aligns with break-even charting conventions. Why Other Options Are Wrong: (B) Variable costs change with units; (C) total cost includes variable + fixed but the categorization sought is fixed; (D) revenue is unrelated; (E) contribution is revenue minus variable cost, not a cost line. Common Pitfalls: Confusing step-fixed, mixed, or discretionary fixed costs; misclassifying short-term campaigns that may vary by season as variable per unit. Final Answer: fixed cost line

Question 15

Work measurement terminology: what is “performance rating” mathematically?  In time study, performance rating relates the observed worker pace to the defined normal performance. Which expression best represents the performance rating factor?

Accepted Answer

Introduction / Context: Time study establishes standard time using observed time, performance rating, and allowances. Correctly defining the performance rating is critical because any error scales the computed normal time directly. Given Data / Assumptions: Observed performance is the analyst’s assessment of worker pace relative to “normal”. Normal performance equals 100% (or 1.0) on the defined scale. Rating factor is typically applied multiplicatively to observed time. Concept / Approach: Performance rating (RF) is the ratio of the observed pace to the defined normal pace. If a worker operates at 120% speed relative to normal, RF = 1.20. Normal time = observed time * RF. None of the provided arithmetic forms (sum, difference, or product of two absolute performances) are correct statements of RF by themselves. Step-by-Step Solution: Define rating: RF = observed performance / normal performance.Apply to time: normal time = observed time * RF.Since options A–C are incorrect formulations, select “none of the above”. Verification / Alternative check: Many organizations use Westinghouse or synthetic rating aids, but the underlying mathematics remains a ratio against the normal benchmark. Why Other Options Are Wrong: (A) and (B) imply dimensional addition/subtraction of two performances; (C) multiplies absolute values rather than creating a ratio; none match the standard definition. Common Pitfalls: Confusing “rating” with “allowance”; using percentage points incorrectly; forgetting to convert percentages to multipliers. Final Answer: none of the above

Question 16

Plant layout analysis tools: which charts support layout design decisions?  Identify the chart(s) commonly employed when designing or improving a plant layout and material flow.

Accepted Answer

Introduction / Context: Effective plant layout depends on understanding operations, resource interactions, and movements. Industrial engineering offers several visual tools to diagnose flow problems and guide layout redesign. Given Data / Assumptions: We examine process steps, human–machine utilization, and interdepartmental travel. Objective is reducing distance, time, and non-value-added motion. Concept / Approach: Operation Process Charts map operations and inspections to reveal routing and sequencing. Man–Machine Charts show how an operator and machine share time, identifying idle periods and synchronization opportunities. Travel Charts (from-from, to-to) quantify frequency and intensity of moves between areas, directly informing adjacency in layout. Step-by-Step Solution: Use the Operation Process Chart to streamline steps and eliminate waste.Build a Man–Machine Chart to balance tasks and size workstations.Compile a Travel Chart to prioritize department adjacency and conveyor/AGV routing.Because each tool addresses a different facet, the comprehensive answer is “all of these”. Verification / Alternative check: Systematic Layout Planning (SLP) formalizes these analyses before block layout and detailed layout stages. Why Other Options Are Wrong: Each single chart alone is informative but incomplete; (E) is not a standard plant layout analysis chart. Common Pitfalls: Skipping data collection for flow frequencies; relying on gut feel instead of charts; ignoring operator utilization in equipment placement. Final Answer: all of these

Question 17

Organizational structure for large-scale automobile manufacturing  Which organisational form is generally preferred for a large automobile manufacturing enterprise to combine clear authority with specialist support?

Accepted Answer

Introduction / Context: Mass production industries such as automobiles require strong line authority for throughput and safety, but also depend on specialist knowledge in planning, quality, maintenance, and industrial engineering. The organisational design must balance both needs. Given Data / Assumptions: High-volume, standardized production with complex supply chains. Need for centralized control and specialist support functions. Multiple plants and departments requiring coordination. Concept / Approach: Line and staff organisation maintains a clear chain of command (line) while providing access to experts (staff) who advise and develop standards, processes, and systems. This structure scales well for automotive factories where production lines must run decisively while planning and technical staff enable continuous improvement. Step-by-Step Solution: Identify the production context: high volume with technical complexity.Recognize the need for both authority and expertise.Select “line and staff organisation” as the best fit. Verification / Alternative check: Automotive OEMs commonly show production lines reporting to plant management (line) with strong engineering, quality, logistics, and HR staff groups. Why Other Options Are Wrong: (A) lacks specialist support; (B) functional alone can blur authority on the shop floor; (D) is an imprecise mix; (E) matrix suits projects, not repetitive line production. Common Pitfalls: Over-empowering staff roles to the point of decision paralysis; unclear delineation of advisory vs line authority. Final Answer: line and staff organisation

Question 18

Predetermined Motion Time Systems (PMTS): members of the PMTS family  Which of the following systems are classified under PMTS used for setting standard times without a stopwatch?

Accepted Answer

Introduction / Context: PMTS techniques assign time values to fundamental motions to produce standard times analytically. They are invaluable for repetitive work and for estimating times during design phases before production begins. Given Data / Assumptions: Systems differ in motion granularity and application scope. All listed systems are widely cited as PMTS variants. Concept / Approach: MTM provides detailed data for reaching, grasping, and moving. Work-Factor Systems quantify motion and fatigue with coded factors. BMTS and related simplified systems aggregate motions for quicker application where detail is unnecessary. Each belongs to the PMTS family. Step-by-Step Solution: Identify the nature of each method: all use predetermined motion times.Confirm they bypass stopwatch timing in favor of motion codes.Therefore, “all of these” is correct. Verification / Alternative check: Industrial engineering references typically group MTM, WF, MOST, MODAPTS, and similar systems under PMTS. Why Other Options Are Wrong: Picking only one would ignore the diversity of PMTS approaches; (E) incorrectly excludes the listed systems. Common Pitfalls: Applying an overly detailed PMTS where an abbreviated one suffices; misinterpreting codes leading to inconsistent standards. Final Answer: all of these

Question 19

Purpose of Work Study: what is it mainly aimed at achieving?  Select the option that best captures the principal aim of Work Study (method study + time study) in industrial engineering.

Accepted Answer

Introduction / Context: Work Study integrates Method Study (how work should be done) and Time Study/PMTS (how long it should take). The combined objective is to improve productivity while safeguarding quality and human factors. Given Data / Assumptions: We seek both an improved method and a fair, repeatable time standard. Standards must reflect normal performance and allowances. Concept / Approach: Method Study eliminates unnecessary motions and rationalizes workflow, layout, tools, and handling. Time Study (or PMTS) then sets a standard time for the improved method by applying rating and allowances. The outcome is a standard method with a standard time for planning, scheduling, costing, and incentive schemes. Step-by-Step Solution: Apply Method Study to define the best way to do the task.Use Time Study/PMTS to compute normal time and standard time.Combine both to formalize standard method and standard time → Option (C). Verification / Alternative check: Work Study handbooks consistently define its deliverables as a documented method and a standard time, not just raw speed targets. Why Other Options Are Wrong: (A) is half the goal (method only); (B) ignores allowances and humane pacing; (D) narrows focus to motions and neglects systems; (E) conflicts with quality and ergonomics. Common Pitfalls: Conducting time study on a poor method; setting standards without allowances; failing to engage operators in method improvement. Final Answer: developing the standard method and standard time of a job

Question 20

Cost–volume relationships: statement about break-even analysis  Evaluate the statement: “Break-even analysis represents the relationship between cost and volume.”

Accepted Answer

Introduction / Context: Break-even analysis is a classic tool in managerial accounting and operations. It explores how costs behave with output and identifies the point at which total revenue equals total cost—neither profit nor loss. Given Data / Assumptions: Within a relevant range, fixed costs are constant and variable cost per unit is constant. Selling price per unit is assumed constant for the analysis. Single product or a weighted average is considered. Concept / Approach: The method decomposes total cost into fixed and variable portions and analyzes total revenue as a linear function of volume. Graphical representation shows cost and revenue lines against output, with their intersection at the break-even quantity. Hence the essence is indeed the relationship between cost and volume (and implied profit). Step-by-Step Solution: Define total cost: TC = Fixed cost + Variable cost per unit * Quantity.Define total revenue: TR = Price per unit * Quantity.Break-even occurs where TR = TC; changing volume shifts profit accordingly. Verification / Alternative check: Contribution margin methods and CVP (Cost–Volume–Profit) analysis formalize the same relationship algebraically and graphically. Why Other Options Are Wrong: (B) contradicts definition; (C) and (E) add unnecessary constraints; (D) confuses pricing strategy with the core CVP model. Common Pitfalls: Ignoring step-fixed or mixed costs; misapplying the linearity assumption outside the relevant range; treating multi-product mixes without proper weighting. Final Answer: True

Industrial Engineering and Production Management Questions