The correct answer is: D. Both (A) and (R) are true, but (R) is not the correct explanation of (A)
Break-even point is the point at which a company’s revenue equals its costs. It can be determined both mathematically and graphically. To determine the break-even point mathematically, you can use the following formula:
Break-even point = Fixed costs / Contribution margin per unit
The contribution margin per unit is the difference between the selling price per unit and the variable cost per unit.
To determine the break-even point graphically, you can plot the company’s total revenue and total costs on a graph. The break-even point is the point where the two lines intersect.
The graph drawn when the break-even point is determined on a graph paper is called a “break-even chart”. However, this does not mean that (R) is the correct explanation of (A). The break-even chart can be used to determine the break-even point, but it is not the only way to do so. The break-even point can also be determined mathematically, as explained above.
In conclusion, both (A) and (R) are true, but (R) is not the correct explanation of (A).