Question

Which of the following statements is true regarding break-even analysis?a) It helps determine profitability at various levels of output.b) It helps determine the ratio between fixed and variable costs.c) It helps determine the ratio between fixed and variable costs.d) It helps evaluate the cost to a company at different levels of product supply.e) It helps analyze the relationship between variable cost and fixed cost.

Answer 1

Answer:

A. It helps determine profitability at various levels of output

Explanation:

Break-even analysis is interchangeably called Cost-volume-profit (CVP) analysis looks at the impact of varying levels of costs and volume have on profitability.

The break-even analysis looks to determine the break-even point for different sales volumes and cost structures, which can be useful for managers making short-term economic decisions.