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In cost-volume-profit (CVP) analysis, what does the break-even point represent?
In cost-volume-profit (CVP) analysis, what does the break-even point represent?
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In cost-volume-profit (CVP) analysis, what does the break-even point represent?
Total revenue equals total costs
Total profit is maximized
Total fixed costs are covered
Total variable costs are minimized
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The break-even point is where total revenue equals total costs, resulting in zero profit.
Questions & Step-by-step Solutions
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Q
Q: In cost-volume-profit (CVP) analysis, what does the break-even point represent?
Solution:
The break-even point is where total revenue equals total costs, resulting in zero profit.
Steps: 5
Show Steps
Step 1: Understand that businesses sell products or services to make money.
Step 2: Know that when a business sells something, it earns revenue (money coming in).
Step 3: Recognize that businesses also have costs (money going out) to operate, like rent, salaries, and materials.
Step 4: The break-even point is the moment when the money earned (total revenue) is exactly equal to the money spent (total costs).
Step 5: At the break-even point, the business is not making a profit, but it is not losing money either; it is at zero profit.
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