Use the figure for the question(s) below.

-The graph above shows the break-even analysis for the cost of making a certain good. Based on this chart, which of the following is true?

Question

Use the figure for the question(s) below.

-The graph above shows the break-even analysis for the cost of making a certain good. Based on this chart, which of the following is true?

Quizplus · Accepted Answer

The break-even point is where the total revenue line intersects the total cost line, resulting in zero profit. In this graph, the break-even point is at $110. Therefore, if the cost of goods sold is $110, the net present value (NPV) of the project will be zero, as the revenue will offset the total cost. Option A is incorrect because NPV is related to the revenue generated, not the cost. Option B is incorrect because the NPV can be positive even if the cost of goods sold is less than $110, as long as the revenue generated is enough to cover the cost and generate a profit. Option D is incorrect because the break-even point is $110, which means that the project should be undertaken as long as the predicted cost is equal to or greater than $110.

Use the Figure for the Question(s) Below