Question

Method of calculation of Break-even analysis is —

• A. Graphical method
• B. Mathematical method
• C. (A) and (B) both
• D. Neither (A) nor (B)

Hint:

Use Graphical Method for visual analysis and Mathematical Method for precise calculation of break-even points.

Answer 1

The Correct Option is C

Step 1: Understanding Break-even Analysis.
Break-even analysis determines the level of sales at which total revenue equals total cost — i.e., no profit, no loss.
It helps managers identify the minimum output or sales volume required to avoid losses.
Step 2: Methods of calculation.
Break-even analysis can be calculated using:
- Graphical Method: Represented visually where the total cost and total revenue curves intersect.
- Mathematical Method: Calculated using the formula:
\[ \text{Break-even Point (in units)} = \frac{\text{Fixed Costs}}{\text{Selling Price per Unit – Variable Cost per Unit}} \]
Hence, both graphical and mathematical methods are valid.
Step 3: Analysis of options.
- (1) Graphical method: Correct but not the only one.
- (2) Mathematical method: Also correct.
- (3) Both (A) and (B): Correct — both are recognized methods.
- (4) Neither (A) nor (B): Incorrect.
Step 4: Conclusion.
Therefore, Break-even analysis can be calculated by both the Graphical and Mathematical methods.