Break-even analysis identifies the sales volume at which revenue equals costs and is used for feasibility.

Break-even analysis identifies the sales volume at which revenue equals costs and is used for feasibility.

• A. The minimum price to cover fixed costs.
• B. The profit margin at target sales.
• C. The growth rate in sales required to become profitable.
• D. The sales volume where revenue equals costs.

Answer: (D)

Break-even analysis centers on the point where total revenue just covers total costs, leaving zero profit. This sales volume is the break-even point and serves as a practical feasibility gauge: it tells you the minimum level of activity needed to avoid a loss and whether your projected demand can realistically reach that level given your costs. The statement matches this idea because it identifies the exact sales volume at which revenue equals costs. It’s not about the price needed to cover fixed costs (that ignores variable costs and volume), nor about the profit margin at a targeted sales level (which assumes some profit at a chosen level rather than the point at which costs are exactly covered). It’s also not about how fast sales must grow to become profitable, which is a growth or profitability timeline rather than the break-even point.

Break-even analysis centers on the point where total revenue just covers total costs, leaving zero profit. This sales volume is the break-even point and serves as a practical feasibility gauge: it tells you the minimum level of activity needed to avoid a loss and whether your projected demand can realistically reach that level given your costs.

The statement matches this idea because it identifies the exact sales volume at which revenue equals costs. It’s not about the price needed to cover fixed costs (that ignores variable costs and volume), nor about the profit margin at a targeted sales level (which assumes some profit at a chosen level rather than the point at which costs are exactly covered). It’s also not about how fast sales must grow to become profitable, which is a growth or profitability timeline rather than the break-even point.