111 11:07 PM Back PS_Chap004.pdf PROBLEM 4-24 Interpretive Questions on the CVP
ID: 2546623 • Letter: 1
Question
111 11:07 PM Back PS_Chap004.pdf PROBLEM 4-24 Interpretive Questions on the CVP Graph [L02, LO6) A CVP graph such as the one shown below is a useful technique for showing relationships among an orga- nization's costs, volume, and profits. Required I. Identify the numbered components in the CVP graph. 2. State the effect of each of the following actions on line 3, line 9, and the break-even point. For line 3 and line 9, state whether the action will cause the line to: Remain unchanged. Shift upward. Shift downward. Have a steeper slope (i.e, rotate upward). Have a flatter slope (i.e., rotate downward). Shift upward and have a steeper slope. Shift upward and have a flatter slope. Shift downward and have a steeper slope. Shift downward and have a flatter slope. In the case of the break-even point, state whether the action will cause the break-even point to: Remain unchanged Increase Probably change, but the direction is uncertain Treat each case independently x. Example. Fixed costs are reduced by $5,000 per period. Line 3: Shift downward. Line 9: Remain unchanged. Break-even point: Decrease Answer (see choices aboveExplanation / Answer
Answer ) CVP refers to Cost Volume Profit Chart. In the above chart, Point - 2 refers to the quantity of break even sales and Point 1 refers to the sales value for break even sales. Point- 6 refers to the break even point. Point -5 refer the fixed cost for production which remains constant irrespective of changes in quantity of production.Point - 4 refers to the variable cost of production.Point - 8 refers to the profit earned by the company.Point -9 refers to the sales value which increases with the incraese in production and Point 3 represents cost of production which increases at lower rate with the increase in production as the fixed cost is constant and oly variable cost is increasing.Point 7 indicates the loss as the cost of production is higher than the sales value, thus the company is incurring losses
Break even point sales refers to the sales where there is no profit and loss i.e the point at which cost of production is equivalent to sales value.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.