Which of the following is correct? The break-even point occurs on the CVP graph where:
A) total profit equals total expenses.
B) total profit equals total fixed expenses.
C) total contribution margin equals total fixed expenses.
D) total variable expenses equal total contribution margin.

Question

Quizplus · Accepted Answer

The break-even point is the point at which the total revenue from sales equals total costs, resulting in zero profit. In other words, it is the point where a company is neither making a profit nor incurring a loss. The contribution margin is the difference between the selling price of a product and its variable costs. Therefore, when the total contribution margin equals the total fixed expenses, the company has broken even, as all fixed costs have been covered by the contribution margin. Option C is the correct statement for the break-even point on the CVP graph.

Which of the Following Is Correct? the Break-Even Point Occurs