The firm's operating breakeven point is the point at which
A) total operating costs equal total fixed costs.
B) total operating costs are zero.
C) EBIT is less than sales.
D) EBIT is zero.

Question

Quizplus · Accepted Answer

The operating breakeven point is the point at which a firm's EBIT is zero, meaning their total revenue equals their total operating costs. Choice A is not correct, as total fixed costs are already factored into the calculation of operating breakeven point. Choice B is not correct, as it is impossible for total operating costs to be zero, as there will always be some form of cost associated with running a business. Choice C is not correct, as EBIT being less than sales would indicate a loss, not the operating breakeven point.

The Firm's Operating Breakeven Point Is the Point at Which