Which condition is associated with a company's break-even point?

Which condition is associated with a company's break-even point?

• A. The company has no profit and has no loss
• B. The company earns a profit equal to fixed costs
• C. The company earns a loss
• D. The company has positive net income

Answer: (A)

Break-even is the point where revenue just covers all costs, so there is no profit and no loss. At break-even, total revenues equal total costs, meaning the amount left after paying variable costs (the contribution margin) exactly covers fixed costs. When that happens, net income is zero, and any additional sale would start generating profit. So the condition described as no profit and no loss matches the break-even state. If the business earns a positive net income, it’s beyond break-even; if it shows a loss, it’s below break-even; a profit equal to fixed costs would still imply a positive net income, not break-even.

Break-even is the point where revenue just covers all costs, so there is no profit and no loss. At break-even, total revenues equal total costs, meaning the amount left after paying variable costs (the contribution margin) exactly covers fixed costs. When that happens, net income is zero, and any additional sale would start generating profit. So the condition described as no profit and no loss matches the break-even state. If the business earns a positive net income, it’s beyond break-even; if it shows a loss, it’s below break-even; a profit equal to fixed costs would still imply a positive net income, not break-even.