1. **Problem Statement:** Identify the break-even level of output from the graph and calculate the margin of safety if the business operates at maximum output. 2. **Understanding Break-Even Point:** The break-even point is where total costs equal total revenue. At this point, the business makes zero profit but also incurs no loss. 3. **From the Graph:** - Fixed Costs are constant at £10,000. - Total Costs start at £10,000 and increase with output. - Revenue starts at £25,000 and decreases with output. - The lines for Total Costs and Revenue intersect at approximately 400 units. 4. **Break-Even Output:** The break-even output is where Total Costs = Revenue, which is at 400 units. 5. **Maximum Output:** From the graph, the maximum output is 800 units. 6. **Margin of Safety Formula:** $$\text{Margin of Safety} = \text{Maximum Output} - \text{Break-Even Output}$$ 7. **Calculate Margin of Safety:** $$\text{Margin of Safety} = 800 - 400 = 400 \text{ units}$$ 8. **Interpretation:** The business can produce 400 units above the break-even point before it starts incurring losses. **Final Answer:** The break-even output is 400 units. The margin of safety at maximum output (800 units) is 400 units.