On a standard break-even chart, the "break-even point" is the intersection of which two curves/lines?

Difficulty: Easy

Correct Answer: Total cost and sales revenue

Explanation:


Introduction / Context:
A break-even chart visualizes cost–volume–profit relationships. Recognizing the correct intersection helps managers see exactly where operations transition from loss to profit.


Given Data / Assumptions:

  • Total cost = fixed cost + variable cost.
  • Sales revenue increases linearly with output in the relevant range.


Concept / Approach:
The break-even point occurs when total cost equals total revenue (sales). Graphically, it is the intersection of the total cost line and the sales revenue line. Fixed cost is a horizontal line and does not intersect sales at BEP by itself.



Step-by-Step Solution:
1) Draw axes: output on x-axis, money on y-axis.2) Plot fixed cost (horizontal), total cost (starting at fixed cost and rising with variable cost), and sales revenue (starting at origin and rising with price per unit).3) Locate the point where total cost intersects sales revenue: that is BEP.


Verification / Alternative check:
At BEP: profit = revenue - total cost = 0; this corresponds exactly to the intersection point.



Why Other Options Are Wrong:
Fixed cost vs total cost: always parallel separation by variable cost; they do not intersect meaningfully.
Fixed cost vs sales revenue: crossing here would not account for variable cost and thus is not BEP.
Variable cost vs fixed cost: this comparison is not used to define BEP.



Common Pitfalls:
Mistaking the fixed cost line for total cost; forgetting variable cost component in total cost.



Final Answer:
Total cost and sales revenue

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