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Chapter 20: Q20-19RQ (page 1119)

On the CVP graph, where is the breakeven point shown? Why?

Short Answer

Expert verified

Answer

On the CVP graph, the breakeven point is the point where the line of sales revenue and total costs intersects.

Step by step solution

01

Step 1:Break-even point

The point where the entity is neither a profit nor not at a loss is known as the breakeven point.

02

Reasoning

The point where the line of sales revenue and total costs intersects is known as the breakeven point because at this level of sales; the operating profit is zero means total sales are equal to the total cost.

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Most popular questions from this chapter

What is cost stickiness? Why do managers need to be aware of cost stickiness?

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Preparing a contribution margin income statement

Gabelman Company sells a product for \(95 per unit. Variable costs are \)40 per unit, and fixed costs are $2,200 per month. The company expects to sell 570 units in September. Prepare an income statement for September using the contribution margin format

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Mi Tierra Driving School charges \(680 per student to prepare and administer written and driving tests. Variable costs of \)408 per student include trainers’ wages, study materials, and gasoline. Annual fixed costs of \(63,920 include the training facility and fleet of cars.

Requirements

1. For each of the following independent situations, calculate the contribution margin per unit and the breakeven point in units by first referring to the original data provided:

a. Breakeven point with no change in information.

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2. Compare the impact of changes in the sales price, variable costs, and fixed costs on the contribution margin per unit and the breakeven point in units.

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