Profit alone does not indicate how many units should be sold before break-even.

• A. Indicates how many units
• B. Does not indicate
• C. Increases risk
• D. Guarantees

Answer: (B)

The key idea here is that break-even can’t be determined from profit alone. Break-even is the point where total revenue equals total costs, so you need fixed costs and the amount each unit contributes toward covering those costs (the contribution margin per unit) to find the exact sales quantity.

Profit depends on how many units you sell and how much each unit adds after variable costs, minus fixed costs. You could have the same profit figure under different cost structures or prices, but the number of units needed to reach break-even changes with those details. By focusing on fixed costs and the contribution margin per unit, you can calculate the break-even point with break-even units = fixed costs divided by contribution margin per unit. That’s why profit alone doesn’t reveal the break-even quantity.