Question

Based on the diagram, has Pete's business broken even (meaning, covered its fixed expenses and become profitable)?
A. Yes B. No C. Not enough information available

Answer 1

C — Not enough information available.

I don’t have the diagram, so I can’t tell whether Pete’s revenue equals his total costs. To determine break-even you need either the diagram itself or these numbers:

- Fixed costs (total), and
- Price per unit and variable cost per unit (or total revenue and total variable cost at the shown sales level).

Methods to check:
- On a cost/revenue graph: break-even is where the total revenue line crosses the total cost line. If the current sales point is at or above that intersection, he’s broken even.
- Algebraically:
- Break-even units = Fixed costs / (Price per unit − Variable cost per unit).
- Or break-even revenue = Fixed costs / Contribution margin ratio, where contribution margin ratio = (Price − Variable cost)/Price.
- At the shown sales quantity, compute profit = (Price − Variable cost)×units − Fixed costs. Profit ≥ 0 means break-even or profitable.

If you upload the diagram or give the numbers shown, I’ll determine the correct answer.