Cost–volume relationships: statement about break-even analysis Evaluate the statement: “Break-even analysis represents the relationship between cost and volume.”

Introduction / Context:
Break-even analysis is a classic tool in managerial accounting and operations. It explores how costs behave with output and identifies the point at which total revenue equals total cost—neither profit nor loss.

Given Data / Assumptions:

• Within a relevant range, fixed costs are constant and variable cost per unit is constant.
• Selling price per unit is assumed constant for the analysis.
• Single product or a weighted average is considered.

Concept / Approach:
The method decomposes total cost into fixed and variable portions and analyzes total revenue as a linear function of volume. Graphical representation shows cost and revenue lines against output, with their intersection at the break-even quantity. Hence the essence is indeed the relationship between cost and volume (and implied profit).

Step-by-Step Solution:
Define total cost: TC = Fixed cost + Variable cost per unit * Quantity.Define total revenue: TR = Price per unit * Quantity.Break-even occurs where TR = TC; changing volume shifts profit accordingly.

Verification / Alternative check:
Contribution margin methods and CVP (Cost–Volume–Profit) analysis formalize the same relationship algebraically and graphically.

Why Other Options Are Wrong:
(B) contradicts definition; (C) and (E) add unnecessary constraints; (D) confuses pricing strategy with the core CVP model.

Common Pitfalls:
Ignoring step-fixed or mixed costs; misapplying the linearity assumption outside the relevant range; treating multi-product mixes without proper weighting.

Final Answer:
True