What is the breakeven point in units for a hospital service line, and which costs are included in its calculation?

• A. Maximum profitable volume
• B. Volume where fixed costs exceed revenue
• C. Volume where total revenues equal total costs
• D. Volume ignoring costs

Answer: (C)

The breakeven point is the unit volume at which revenue exactly covers all costs, so profit is zero. To reach this point, you must cover both fixed costs that don’t change with volume in the short term and variable costs that increase with each additional unit of service. The calculation uses fixed costs divided by the contribution margin per unit (price per unit minus variable cost per unit). At breakeven, total revenues equal total costs. This is why the description that best fits is the volume where total revenues equal total costs and includes both fixed and variable costs in the calculation. The other statements don’t fit: breakeven is not the maximum profitable volume, it’s not a volume where fixed costs exceed revenue, and it certainly isn’t a scenario that ignores costs.