Tipping Point: Calculating Break-Even Point

Explain the concept of break-even point as described in the text.

• The point where total revenue equals total costs, resulting in no profit or loss.

• The point where total revenue exceeds total costs, resulting in profit.

• The point where total costs exceed total revenue, resulting in loss.

• The point where fixed costs are completely covered by variable costs.

What is the break-even point in a business?

• A) When total sales income equals total costs

• B) When total sales income is less than total costs

• C) When total sales income is more than total costs

Fill in the blank: The break-even point occurs when expenses and revenue are equal with no profit or _______.

• loss

• gain

• surplus

• deficit

Which of the following is an example of a fixed cost?

• Property taxes

• Sales commissions

• Raw materials

What are variable costs?

• Costs that remain constant regardless of sales volume.

• Costs that change with changes in sales volume.

• Costs that are fixed for a certain period.

• Costs that are not related to sales volume.

Fill in the blank: Semi-variable costs are costs that are considered ______ because they vary to some extent in response to sales.

• semi-variable

• fixed

• variable

• non-variable

Which of the following is an example of a variable cost?

• A) Rent

• B) Salaries

• C) Cost of goods

• D) Insurance

What are the two ways that sales revenues can increase?

How have sales revenues changed as the number of products sold has increased?

What is the main consideration for a business when setting a selling price for a product?

• Cost of production

• Competitor pricing

• Customer demand

• All of the above