1. **Problem Statement:** Identify the area of profit and loss on a break-even diagram. 2. **Understanding the Break-Even Diagram:** - The break-even point is where total costs equal revenue. - Profit area is where revenue is greater than total costs. - Loss area is where total costs are greater than revenue. 3. **Identifying Profit Area:** - On the graph, profit occurs to the right of the break-even point where the revenue line is above the total costs line. 4. **Identifying Loss Area:** - On the graph, loss occurs to the left of the break-even point where the total costs line is above the revenue line. 5. **Summary:** - Shade the area to the right of the break-even point between revenue and total costs as profit. - Shade the area to the left of the break-even point between total costs and revenue as loss. --- 1. **Problem Statement:** Using break-even diagrams for Business A and Business B, identify: (i) The most favourable break-even point in units. (ii) The lowest fixed cost. (iii) The highest sales price per unit. (iv) The lowest variable cost per unit. 2. **Break-Even Point:** - The break-even point is where total costs equal revenue. - The most favourable break-even point is the lowest output at which this occurs. 3. **Fixed Costs:** - Fixed costs are represented by the horizontal line. - The lower this line, the lower the fixed costs. 4. **Sales Price per Unit:** - Sales price per unit is the slope of the revenue line. - The steeper the revenue line, the higher the sales price per unit. 5. **Variable Cost per Unit:** - Variable cost per unit is the slope of the variable costs line. - The less steep the variable costs line, the lower the variable cost per unit. 6. **Analysis:** - Business A break-even point is around 150 units. - Business B break-even point is higher than 150 units. - Fixed costs: Business A approx 600, Business B approx 900. - Revenue line slope: Business A is steeper than Business B. - Variable costs slope: Business A is steeper than Business B. 7. **Answers:** (i) Most favourable break-even point: Business A (lower units). (ii) Lowest fixed cost: Business A (600 < 900). (iii) Highest sales price per unit: Business A (steeper revenue line). (iv) Lowest variable cost per unit: Business B (less steep variable cost line). --- **Final answers:** (i) Business A (ii) Business A (iii) Business A (iv) Business B