The Break-Even Point Indicates the Level of Operation of the Business

question 25

Multiple Choice

The break-even point indicates the level of operation of the business at which:

• A) Fixed expenses equal variable expenses
• B) Current assets equal current liabilities
• C) Total costs equal total revenue
• D) Total revenue is greater than total costs

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Definitions:

Quantity

The amount or number of a material or immaterial good considered as a discrete unit or in total.

AVC

Average Variable Cost, which is the variable cost per unit of output, including costs that change with production volume.

ATC

Average Total Cost (ATC) refers to the total cost per unit of output, calculated by dividing the total cost by the quantity of output produced.

Economic Loss

The difference between the revenues received from the sale of an output and the opportunity cost of the inputs used.