[amp_mcq option1=”Total revenue is equal to total cost” option2=”Contribution is equal to the total fixed cost” option3=”Neither profit nor loss” option4=”All of the above” correct=”option4″]
The correct answer is D. All of the above.
The break-even point is the point at which a company’s total revenue equals its total costs. At this point, the company neither makes a profit nor a loss. The break-even point can be calculated using 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.
When a company reaches its break-even point, it has covered all of its fixed costs and is now making a profit on each additional unit sold. The break-even point is an important concept for businesses to understand, as it can help them to plan their operations and make informed decisions about pricing and production.
Here is a brief explanation of each option:
- Option A: Total revenue is equal to total cost. This is the definition of the break-even point.
- Option B: Contribution is equal to the total fixed cost. Contribution is the amount of revenue that is left over after variable costs have been covered. At the break-even point, all of the revenue is being used to cover fixed costs, so contribution is equal to the total fixed cost.
- Option C: Neither profit nor loss. This is also the definition of the break-even point. At the break-even point, the company is neither making a profit nor a loss.