The point at which total fixed costs plus total variable costs equal total revenue is called the ______ point.

The point at which total fixed costs plus total variable costs equal total revenue is called the ______ point.

• A. Critical
• B. Break-even
• C. Profit
• D. Threshold

Answer: (B)

The point being tested is break-even. It’s the level of sales where total revenue exactly covers all costs—fixed plus variable. Since total costs equal fixed costs plus variable costs, break-even happens when revenue equals those costs (TR = FC + VC). At this moment there is zero profit, because revenue just covers every cost incurred. Any sales above this level contribute to profit, while any below lead to a loss. This is the essence of break-even analysis: it shows how much must be sold to cover costs. For reference, a common way to think about it is that the contribution per unit (price minus variable cost per unit) times the break-even quantity equals fixed costs.

The point being tested is break-even. It’s the level of sales where total revenue exactly covers all costs—fixed plus variable. Since total costs equal fixed costs plus variable costs, break-even happens when revenue equals those costs (TR = FC + VC). At this moment there is zero profit, because revenue just covers every cost incurred. Any sales above this level contribute to profit, while any below lead to a loss. This is the essence of break-even analysis: it shows how much must be sold to cover costs. For reference, a common way to think about it is that the contribution per unit (price minus variable cost per unit) times the break-even quantity equals fixed costs.