The Point Where the Sales Line and the Total Costs

question 214

Multiple Choice

The point where the sales line and the total costs line intersect on the cost-volume-profit chart represents:

• A) the maximum possible operating loss
• B) the maximum possible operating income
• C) the total fixed costs
• D) the break-even point

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Definitions:

Loss-Minimizing Level

The production level at which a firm minimizes its losses in the short run when it cannot cover total costs, but can cover variable costs.

Fixed Cost

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Variable Cost

Costs that change in proportion to the good or service that a business produces.

Profit

The financial gain obtained when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.