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CMA Intermediate · Management Accounting · Marginal Costing (Management Accounting)

On a conventional break-even chart, the break-even point is shown at the intersection of which two lines?

The break-even point is where the sales revenue line intersects the total cost line. At this point revenue equals total cost, so there is neither profit nor loss. Volumes beyond it show profit as the gap between the two lines.

  1. ATotal cost line and fixed cost line
  2. BSales revenue line and total cost lineCorrect
  3. CSales revenue line and variable cost line
  4. DFixed cost line and variable cost line

Explanation

At the break-even point, total revenue equals total cost, so profit is nil. The sales line therefore cuts the total cost line at that point. Beyond it the gap between the lines represents profit; the fixed cost line is horizontal and never meets sales at break-even.

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