In Break Even Analysis Total Cost Consists of

By BYJU'S Exam Prep

Updated on: September 25th, 2023

In break even analysis total cost consists of

  1. fixed cost plus sales revenue 
  2. variable cost plus sales revenue
  3. fixed cost plus variable cost
  4. fixed cost plus variable cost plus profit 

Answer: C- fixed cost plus variable cost

In break-even analysis, total cost consists of fixed cost plus variable cost.


Break-even point – It refers to a method of identifying the point at which an organization neither makes a profit nor suffers a loss, or in other words, the point at which all costs are equal to all revenues, or the point of zero profit (Break-even point).

Fixed cost :

  • The cost stays the same for a specified period (lifetime).
  • This cost is independent of the volume of the production. Hence it is unaffected by the volume of the production.
  • For example, rent, taxes, the supervisor’s salary, the machine’s cost, the cost of insurance, etc.

Variable cost :

  • The cost varies in direct proportion to the production.
  • The variable cost increases as the output increases.
  • For example, the price of labor, raw materials, etc.

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