Question

	19.		The volume of activity where an organization's expenses equal its income
			is called:
			a.	A contribution margin.
			b.	A break-even point.
			c.	A target net profit.
			d.	A safety margin.

Answer 1

Analysis of all the options:

a. Contribution margin - It is the value is the selling price less variable cost. Hence, it does not represent the volume of activity where an organization's expenses equal its income.

b. Break-even point - It represents the level of units where the profit of the firm is zero i.e. the level where expenses equal its income. Hence, break-even point is the correct answer.

c. Target net profit - It represents the level of profit the organization desires to earn over and above the break-even point. Hence, this is not the correct answer.

d. Safety margin - It calculates the sales over and above the break-even level of sales. Hence, it cannot be the answer.

Accordingly, option b i.e. break-even point is the correct answer.