Answered: 70,000 60,000- 50,000 40,000 30,000…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Analyzing a cost-volume-profit graph

Nolan Rouse is considering starting a Web-based educational business, e-Prep MBA. He plans to offer a short-course review of accounting for students entering MBA programs. The materials would be available on a password-protected Web site; students would complete the course through self—study. Rouse would have to grade the course assignments, but most of the work would be in developing the course materials, setting up the site, and marketing. Unfortunately, Rouse’s hard drive crashed before he finished his financial analysis. However, he did recover the following partial CVP chart:

Requirements

Label each axis, the sales revenue line, the total costs line, the fixed costs line, the operating income area, and the breakeven point.
It Rouse attracts 300 students to take the course, will the venture be profitable Explain your answer.
What are the breakeven sales in students and dollars?

70,000
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50,000
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30,000
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10,000
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