Required information Dollars $1800,000 Maximum productive capacity = 1,800 units $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 0 Break-Even Point (sales of 800 units or $80,000) Loss Area 200 Total Sales 0:00 / 1:56 Total Costs Profit Area 400 600 800 1,000 1,200 1,400 1,600 1,800 Volume (units produced and sold Knowledge Check 01 Based on a CVP graph, select the correct drop-down answer for each question. Line that starts at zero on the vertical axis with a slope based on the selling price per unit. Line that starts at the fixed cost level on the vertical axis and increases based on the slope of the variable cost per unit.
Required information Dollars $1800,000 Maximum productive capacity = 1,800 units $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 0 Break-Even Point (sales of 800 units or $80,000) Loss Area 200 Total Sales 0:00 / 1:56 Total Costs Profit Area 400 600 800 1,000 1,200 1,400 1,600 1,800 Volume (units produced and sold Knowledge Check 01 Based on a CVP graph, select the correct drop-down answer for each question. Line that starts at zero on the vertical axis with a slope based on the selling price per unit. Line that starts at the fixed cost level on the vertical axis and increases based on the slope of the variable cost per unit.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:### Required Information
#### Graph Description
The image displays a Cost-Volume-Profit (CVP) graph illustrating financial data:
- **Title:** Maximum productive capacity = 1,800 units
- **Axes:**
- Vertical axis: Dollars ($0 to $180,000)
- Horizontal axis: Volume (units produced and sold, 0 to 1,800)
#### Key Elements
- **Break-Even Point:**
- Sales of 800 units or $80,000.
- This is the intersection where total sales equal total costs.
- **Lines and Areas:**
- **Total Sales Line:** Starts at zero and rises with a slope based on the selling price per unit, shown in green.
- **Total Costs Line:** Begins at a fixed cost level, shown in red, and increases with the slope of the variable cost per unit.
- **Loss Area:** Located below the break-even point, shaded in pink.
- **Profit Area:** Shaded in blue, above the break-even point extending to maximum capacity.
### Knowledge Check 01
<b>Based on a CVP graph, select the correct drop-down answer for each question.</b>
- **Option 1:** Line that starts at zero on the vertical axis with a slope based on the selling price per unit.
- **Option 2:** Line that starts at the fixed cost level on the vertical axis and increases based on the slope of the variable cost per unit.
Transcribed Image Text:### Required Information
**Learning Objective 05-P2: Compute the break-even point for a single-product company.**
A company’s break-even point for a period is the sales volume at which total revenues equal total costs. To compute a break-even point in terms of sales units, we divide total fixed costs by the contribution margin per unit. To compute a break-even point in terms of sales dollars, divide total fixed costs by the contribution margin ratio.
---
### Cost-Volume-Profit Chart
- **Largest Income:** $30,000
- **Maximum Productive Capacity:** 1,800 units
- **Sales at Maximum Productive Capacity:** $180,000
#### Chart Details
The chart illustrates the relationship between costs, volume, and profit. Key elements include:
- A green line representing **Total Sales**.
- A red line representing **Total Costs**.
- The **Break-Even Point** is indicated at the intersection of total sales and total costs, which is at 800 units or $80,000. This point is where the company covers all its costs with no profit or loss.
- The area above the break-even point, up to the maximum productive capacity, represents potential profit.
- The graph also shows maximum capacity at 1,800 units, where sales equal $180,000, resulting in the largest income of $30,000.
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