Cost- volume profit (CVP) chart: The CVP chart shows the relation between cost, units and profit of the product. The elements of the CVP charts are explained as follows: 1. Sales Line: Sales line shows the total sales at a given level of output. It changes with the change in level of units. 2. Fixed Cost line: Fixed cost line represents the amount to total fixed cost at a given level of production. It remains same irrespective of the level of sales. 3. Total Cost line: Total cost line represents the amount of total cost ate a given level of output. The Total costs changes with the change in level of output. 4. Breakeven point: In CVP graph, Breakeven point is the point at which Sales line meets Total cost line, or say it is the level of output at which sales is equal to the total cost and there is no profit or loss. Breakeven point in units is calculated with the help of following formula: B r e a k e v e n p o i n t ( U n i t s ) = T o t a l F i x e d C o s t ( S a l e s p r i c e p e r u n i t – V a r i a b l e c o s t p e r u n i t ) To determine: The effect of each change on the elements of CVP graph

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Chapter 21, Problem E21.40E

To determine

Concept Introduction:

Cost- volume profit (CVP) chart: The CVP chart shows the relation between cost, units and profit of the product. The elements of the CVP charts are explained as follows:

1. Sales Line: Sales line shows the total sales at a given level of output. It changes with the change in level of units.

2. Fixed Cost line: Fixed cost line represents the amount to total fixed cost at a given level of production. It remains same irrespective of the level of sales.

3. Total Cost line: Total cost line represents the amount of total cost ate a given level of output. The Total costs changes with the change in level of output.

4. Breakeven point: In CVP graph, Breakeven point is the point at which Sales line meets Total cost line, or say it is the level of output at which sales is equal to the total cost and there is no profit or loss. Breakeven point in units is calculated with the help of following formula:

$B r e a k e v e n p o i n t (U n i t s) = \frac{T o t a l F i x e d C o s t}{(S a l e s p r i c e p e r u n i t - V a r i a b l e c o s t p e r u n i t)}$

To determine: The effect of each change on the elements of CVP graph

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