# ECONOMICS

## COST ACCOUNTING

### BREAK EVEN POINT

 Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
What is a business doing at the break even point?
 A Making a loss B Producing the startup output C Making neither a profit nor a loss D Making a profit.
Explanation:

Detailed explanation-1: -As illustrated in the graph above, the point at which total fixed and variable costs are equal to total revenues is known as the break-even point. At the break-even point, a business does not make a profit or loss. Therefore, the break-even point is often referred to as the “no-profit” or “no-loss point.”

Detailed explanation-2: -The break-even point is the point at which total cost and total revenue are equal, meaning there is no loss or gain for your small business. In other words, you’ve reached the level of production at which the costs of production equals the revenues for a product.

Detailed explanation-3: -Break-even point This is the point where your total revenue (sales or turnover) equals total costs. At this point there is no profit or loss-in other words, you ‘break even’.

Detailed explanation-4: -Sales and the Break-Even Point If revenues are less than total cost, a company does not reach the break-even point, which results in a loss. A company that fails to make enough sales to meet the break-even point accumulates debt over time, which can eventually cause a company to go out of business.

Detailed explanation-5: -Assume a company has \$1 million in fixed costs and a gross margin of 37%. Its breakeven point is \$2.7 million (\$1 million ÷ 0.37). In this breakeven point example, the company must generate \$2.7 million in revenue to cover its fixed and variable costs. If it generates more sales, the company will have a profit.

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