Which concept measures the point where revenue covers costs?

• A. Marketing
• B. Break-even point
• C. Demand
• D. Record keeping

Answer: (B)

Revenue covering costs is determined by the break-even point. This is the sales level where total revenue equals total costs, so there’s no profit or loss. It blends fixed costs (which don’t change with output) and variable costs (which rise with production) to show how much must be sold to simply cover everything.

Think of it in practical terms: at the break-even point, what you earn from selling each unit (the price) minus what it costs to make that unit (the variable cost) exactly pays for the fixed costs you incur regardless of sales. The math in units is break-even units = fixed costs / (price per unit − variable cost per unit). In dollars, break-even revenue = fixed costs / (contribution margin ratio). For example, if fixed costs are $1,000, price per unit is $20, and variable cost per unit is $12, the break-even point is 125 units, and break-even revenue is $2,500. Selling more than that yields profit; selling less yields a loss.

Other options don’t measure this specific threshold. Marketing is about promoting and selling, not calculating cost coverage. Demand relates to how much buyers want to purchase, not the point at which revenue just covers costs. Record keeping is about tracking information, not the sales-to-costs balance.