Which of the following best describes break-even analysis?

Break-even analysis is a financial calculation that identifies the point at which total revenues equal total costs, resulting in neither profit nor loss. This concept is essential for businesses to understand the minimum sales volume needed to cover all fixed and variable costs associated with producing and selling a product or service. By determining this break-even point, a company can set sales targets, evaluate profitability, and make informed decisions about pricing, production levels, and budgeting.

When assessing other options, calculating the amount of profit generated pertains more to evaluating financial performance after the break-even point has been established, rather than identifying the break-even point itself. Estimating the selling price for maximum profit focuses on setting prices strategically to enhance profitability but does not relate directly to understanding the costs and sales levels that would achieve break-even. Identifying customer demand for a product is important for market research, but it does not directly address the financial concept of break-even analysis.