Chapter 6.4, Problem 4LC

To determine

To write: the relationship between income and expenses before a break-even point is reached, and to write the relationship between income and expenses after a break-even point is reached.

Answer to Problem 4LC

Explanation of Solution

Given information:

Calculation:

The breakeven point for a business is the point at which income equals expenses.

The graph shows the breakeven point for one business.

The line $A$ shows dollars spend on expenses. The line $B$ shows dollars receives as income. Their intersection point ‘ $y$ ’ is the breakeven point.

  

It is evident from the graph that before break-even point expenses exceeds income and after break even-point income exceeds expenses.