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The breakeven point of a processing plant is the output at which

  • A.Total revenue equals total cost
  • B.Variable cost equals fixed cost
  • C.Profit is maximised
  • D.The plant reaches rated capacity

Answer: A

Correct answer: Total revenue equals total cost

At breakeven the plant makes neither profit nor loss:

\[ Q_{BE} = \frac{\text{Fixed cost}}{\text{Price} - \text{Variable cost per unit}} \]

The denominator is the contribution per tonne - what each tonne contributes towards the fixed costs once its own variable cost has been met.

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