Final answer:
The sales level where a project's net income is zero is called the accounting break-even point, indicating no profit is made as revenues cover total explicit costs.
Step-by-step explanation:
The sales level that results in a project's net income exactly equaling zero is called the accounting break-even point. This is a critical concept in business and financial analysis, signifying the point at which total revenues exactly cover total explicit costs, including both variable and fixed costs. An accounting break-even analysis is essential for businesses to understand at what point they start to become profitable or to plan for various business scenarios.
To clarify, the accounting profit is calculated by subtracting explicit costs from total revenues. If we use a provided example where total revenues are $1,000,000 and explicit costs are the sum of $600,000, $150,000, and $200,000, the accounting profit equates to $50,000. A break-even point would be achieved if these explicit costs matched the revenues, making the profit zero.
Economic profit, on the other hand, also considers implicit costs. Using the same example, if the implicit cost were $30,000, subtracting this from the accounting profit of $50,000 would result in an economic profit of $20,000. The break-even point discussed here specifically refers to the accounting perspective where no economic profit is considered.