Break-even point occurs when contribution covers fixed costs

Steps:

• Define break-even as the sales level where profit is zero.
• Express profit formula: Profit = Total contribution - Total fixed costs.
• Set profit to zero: Total contribution = Total fixed costs.
• Match this to option A, confirming it describes the break-even condition.

Why A is correct:

• By definition, at break-even, total contribution exactly equals total fixed costs, as per the profit formula where revenues cover all costs with no profit or loss.

Why the others are wrong:

• B: Total contribution equaling total costs implies revenues exceed costs, creating profit, not break-even.
• C: This misapplies the formula; expected profit is contribution minus fixed costs, not their sum.
• D: Margin of safety measures excess sales over break-even, not identified by contribution alone.

Final answer: A