A break-even analysis graph shows curves for which of the following?

A break-even analysis graph shows curves for which of the following?

• A. Total costs, fixed costs, and revenue
• B. Variable costs, fixed costs, and revenue
• C. Total costs and revenue
• D. Fixed costs and revenue

Answer: (A)

Break-even analysis focuses on how revenue compares to costs as output changes. To illustrate this, the graph shows a fixed-cost line, a total-cost line, and a revenue line. The fixed-cost line is horizontal because these costs don’t vary with units produced. The total-cost line starts at the level of fixed costs and rises as variable costs accumulate with each additional unit. The revenue line increases with units sold, typically with a slope equal to the selling price. The intersection of the revenue line and the total-cost line marks the break-even point, where revenue just covers all costs. Including the fixed-cost line helps visualize how much revenue is needed before any profit is possible. If you left out the fixed-cost line or the total-cost curve, you wouldn’t have a complete picture of when revenue meets all costs, which is essential for break-even.

Break-even analysis focuses on how revenue compares to costs as output changes. To illustrate this, the graph shows a fixed-cost line, a total-cost line, and a revenue line. The fixed-cost line is horizontal because these costs don’t vary with units produced. The total-cost line starts at the level of fixed costs and rises as variable costs accumulate with each additional unit. The revenue line increases with units sold, typically with a slope equal to the selling price. The intersection of the revenue line and the total-cost line marks the break-even point, where revenue just covers all costs. Including the fixed-cost line helps visualize how much revenue is needed before any profit is possible. If you left out the fixed-cost line or the total-cost curve, you wouldn’t have a complete picture of when revenue meets all costs, which is essential for break-even.