What is the correct answer?


The output where TC = TR & AC = AR:

A. Break-even point

B. Load point

C. Shut-down point

D. Revenue cost point

Correct Answer :

A. Break-even point

Break-even point?In economics & business, specifically cost accounting, the breakeven point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has broken even. A profit or a loss has not been made, although opportunity costs have been paid, and capital has received the riskadjusted, expected return.

Break even point is the level of sales at which profit is zero. According to this definition, at break even point sales are equal to fixed cost plus variable cost (b/c total cost is the sum of fixed cost and variable cost). This concept is further explained by the the following equation: [Break even sales = fixed cost + variable cost] The main advantages of break even point analysis is that it explains the relationship between cost, production, volume and returns. It can be extended to show how changes in fixed cost, variable cost, commodity prices, revenues will effect profit levels and break even points. Break even analysis is most useful when used with partial budgeting, capital budgeting techniques. The major benefits to use break even analysis is that it indicates the lowest amount of business activity necessary to prevent losses. Break-even price analysis calculates the price necessary at a given level of production to cover all costs. Break-even Point calculation � Calculation of the BEP can be done using the following formula:
BEP = break-even point (units of production)
TFC = total fixed costs,
VCUP = variable costs per unit of production,
SUP = selling price per unit of production. }

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