Multiple Choice
The optimal capital structure is determined by several factors, including all of the following except:
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1. Introduction to Accounting
Fundamental Accounting Equation
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The break-even point is the level of sales at which the profit equals:
A
Total variable costs
B
Total fixed costs
C
\$0$
D
Total sales revenue
Verified step by step guidance1
Understand the concept of the break-even point: It is the level of sales at which total revenue equals total costs, resulting in zero profit or loss.
Break down the costs: Total costs consist of fixed costs (costs that do not change with the level of production) and variable costs (costs that change with the level of production).
Set up the equation for the break-even point: At the break-even point, Total Sales Revenue = Total Fixed Costs + Total Variable Costs.
Rearrange the equation to isolate the profit: Profit = Total Sales Revenue - (Total Fixed Costs + Total Variable Costs). At the break-even point, Profit = \$0$.
Interpret the result: The break-even point is achieved when the profit equals \$0$, meaning the business covers all its costs but does not generate any profit.
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