What is the level of output that generates neither profit nor loss, shown on the x-axis of a break-even chart?

• A. Profit
• B. Break-even quantity (BEQ)
• C. Break-even point
• D. Margin of safety

Answer: (B)

The moment you’re looking for is the output level at which total revenue exactly covers total costs, so profit is zero. On a break-even chart, the x-axis shows quantity of output, and the two lines for revenue and costs intersect at that exact point. That intersection corresponds to the break-even quantity—the amount produced where you’re neither making nor losing money. Above it you’d have profit, below it a loss. The margin of safety is a separate idea—the distance between current output and this break-even quantity.