Which of the Following Definitions of Break-Even Point Is Correct

question 5

Multiple Choice

Which of the following definitions of break-even point is correct?

• A) The break-even point is where total revenue equals total fixed costs plus variable costs.
• B) The break-even point is where total sales revenue equals total contribution.
• C) The break-even point is where total fixed costs equals total variable costs.
• D) The break-even point is where total revenue equals total fixed costs less variable costs.

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Definitions:

Economic Order Quantity Model

A mathematical model that determines the optimal order size that minimizes the total cost of holding and ordering inventory.

Production Order Quantity Model

A mathematical model used to determine the optimal order quantity that minimizes total inventory costs, considering both holding and setup costs.

Annual Setup Costs

The total expenses incurred from setting up machinery or equipment for production runs in a factory, accumulated on a yearly basis.

Ordering Costs

Expenses incurred in placing and receiving orders from suppliers, including costs related to processing, shipping, and handling.