Break-even point occurs when revenue equals expenses.

• A. It occurs when total profit is maximized
• B. Revenue equals expenses
• C. It occurs when revenue is zero
• D. It occurs when fixed costs are zero

Answer: (B)

Break-even is the point where what you bring in from sales exactly covers all the costs of running the business. At this point, profit is zero because revenue is equal to total expenses, including both fixed costs (which don’t change with output) and variable costs (which do change with how much you produce or sell). This idea helps determine how many units to sell or what revenue level is needed before you start making a profit.

To see it in numbers, you can think in units: break-even units = fixed costs divided by the contribution margin per unit (selling price minus variable cost per unit). In dollars, break-even revenue = fixed costs divided by the contribution margin ratio (contribution margin per unit divided by price). The core takeaway is that at break-even, total revenue equals total costs.

That’s why the statement “revenue equals expenses” is the best description. It’s not about maximizing profit, nor about revenue being zero, and fixed costs being zero doesn’t by itself define break-even. Break-even focuses on covering all costs with revenue, resulting in zero profit.