Which of the following best describes the term 'break-even point'?

The term 'break-even point' is best described as the level of sales where total revenue equals total costs. This definition is crucial in understanding business profitability, as it indicates the sales volume at which a company neither makes a profit nor incurs a loss. At this point, all expenses, including both fixed and variable costs, are covered by the revenue generated from sales.

Understanding the break-even point helps businesses make informed decisions about pricing, cost management, and sales targets. For instance, knowing this point allows a company to determine how many units it needs to sell to start making a profit and to assess financial risk.

Other options describe different concepts. The point at which profit begins to exceed fixed costs refers to the point of profitability but does not encompass the entirety of total costs that include variable expenses. The maximum capacity of output a company can achieve pertains to production limits rather than financial metrics like revenue and costs. The lowest price at which a company can sell its product relates to pricing strategies but does not define a break-even point, which is fundamentally about the relationship between sales and total costs.