The sales level at which a company neither earns a profit nor incurs a loss is the:
A) Relevant range.
B) Margin of safety.
C) Step-wise variable level.
D) Break-even point.
E) Contribution margin.

Question

Quizplus · Accepted Answer

The break-even point is the sales level at which a company neither earns a profit nor incurs a loss. At this point, the contribution margin equals the fixed costs of the company, and all revenue earned beyond the break-even point contributes to profit. The relevant range refers to the range of activity levels for which the company's cost behavior is valid, while the margin of safety represents the excess of budgeted sales over the break-even sales. Step-wise variable level is not a relevant concept in this context.

The Sales Level at Which a Company Neither Earns a Profit