The break-even point is that at which:

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Question restatement: The break-even point is that at which: Select one: a) The level of activity at which total fixed cost high; b) The level of activity at which total fixed cost is equal to the total variable cost; c) The level of activity at which total cost equals to the total revenue; d) The level of activity at which total variable cost is low.

Option a: The level of activity at which total fixed cost high. This is incorrect because break-even analysis is not about a fixed level where fixed costs are high; fixed costs are constant regardless of activity level, so they do not become 'high' at a specific activity level. Break-even focuses on costs and revenues relative to activity, not on a subjective notion of fixed cost magnitude.

Option b: The level of activity at which total fixed cost is equal to the total variable cost. This describes a specific relationship between fixed and variable costs, but the conventional break-even point is where total costs (fixed plus variable) equal total revenue, not where fixed and variable costs are equal. It conflates cost structure with profitability.

Option c: The level of activity at which total cost equals to the total revenue. This is the standard definition of break-even: at this activity level, earnings are zero because all costs (fixed plus variable) are covered by the revenue generated, leaving no profit or loss.

Option d: The level of activity at which total variable cost is low. This is incorrect because break-even is not determined by how low variable costs are at some activity level; variable costs change with activity, and the break-even condition depends on the balance between total costs and total revenue, not on the absolute level of variable costs alone.

Additional notes: Understanding break-even requires recognizing that total cost is the sum of fixed costs and variable costs (which vary with activity). The revenue line increases with activity, and the break-even point is where these two lines intersect, i.e., where total cost equals total revenue. Other options either misstate the relationship between fixed and variable costs, or mischaracterize the concept of break-even as related to profitability rather than equality of costs and revenue.

MCD2150 - T3 - 2025 Week 10 Workshop 1 Quiz

The break-even point is that at which:

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