Which of the Following Is TRUE About the Break-Even Point

question 31

Multiple Choice

Which of the following is TRUE about the break-even point?

• A) When sales are equal to the break-even point, profit will be zero.
• B) When sales exceed the break-even point, profits will be negative.
• C) When sales are below the break-even point, profits will be positive.
• D) Once sales exceed the break-even point, profits no longer change if sales increase further.
• E) The total revenue and total cost are equal at the point where profits are maximized.

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Definitions:

Cost-Volume-Profit Analysis

Cost-Volume-Profit Analysis is a management accounting tool that helps determine how changes in cost and volume affect a company's profit.

Curvilinear

Pertains to something shaped or moving in curved lines.

Relevant Range

The range of activity within which the assumptions about fixed and variable cost behaviors hold true.

High-Low Method

An accounting method used to estimate the fixed and variable components of a cost based on the highest and lowest levels of activity.