Question

In a break-even graph, the fixed cost line:

A) has a slope equal to fixed cost per unit.
B) has a slope equal to sales price per unit.
C) has a slope equal to variable cost per unit.
D) remains constant across all sales volumes.

Answer 1

The fixed cost line in a break-even graph remains constant and does not change with the number of units produced, so the correct answer is D) remains constant across all sales volumes.

Step-by-step explanation:

In a break-even graph, the line representing fixed costs does not vary with the number of units produced. Instead, it remains the same regardless of the production volume. This means that the correct answer to the question about the nature of the fixed cost line in a break-even graph is: D) remains constant across all sales volumes.

At zero production, fixed costs still exist, and these are depicted as the vertical intercept of the total cost curve on a break-even graph. As production increases, variable costs are added to fixed costs to calculate the total cost. The marginal cost of the first unit of output is the same as the total cost, which includes these fixed costs. The fixed cost line represents the costs that a company incurs even when output is zero, thus no variable costs are involved.