Break-even occurs when total revenue equals total costs.

Break-even occurs when total revenue equals total costs.

• A. Break-even occurs when total revenue equals total costs.
• B. Break-even occurs when total revenue is less than total costs.
• C. Break-even occurs when total costs exceed revenue.
• D. Break-even occurs when fixed costs are zero.

Answer: (A)

Break-even is the point at which revenue just covers all costs, leaving zero profit. When total revenue equals total costs, net income is zero, which is exactly what break-even means. If revenue climbs above that level, a profit appears; if revenue is below it, there’s a loss. Fixed costs don’t have to be zero for break-even to occur—their level helps determine how much revenue is needed to reach that point, through the relationship between price, variable cost per unit, and volume. Thus, the statement that break-even occurs when total revenue equals total costs correctly captures the defining condition.

Break-even is the point at which revenue just covers all costs, leaving zero profit. When total revenue equals total costs, net income is zero, which is exactly what break-even means. If revenue climbs above that level, a profit appears; if revenue is below it, there’s a loss. Fixed costs don’t have to be zero for break-even to occur—their level helps determine how much revenue is needed to reach that point, through the relationship between price, variable cost per unit, and volume. Thus, the statement that break-even occurs when total revenue equals total costs correctly captures the defining condition.