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Break-even analysis: components of total cost versus output In a cost–volume–profit (CVP) framework, total cost (TC) varies with output. Select the correct composition of total cost.

Difficulty: Easy

Fixed cost + Sales revenue
Variable cost + Sales revenue
Fixed cost + Variable cost
Fixed cost + Variable cost + Profit

Correct Answer: Fixed cost + Variable cost

Explanation:

Definitions
Total cost (TC) = Fixed cost (does not vary with output) + Variable cost (varies with output). Sales revenue and profit are not parts of cost.

Break-even condition
At break-even: Sales revenue = Total cost = Fixed cost + Variable cost.

Final Answer
Fixed cost + Variable cost.

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