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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Cost-volume-profit graph
For the coming year. Cabinet Inc. anticipates fixed costs of $60,000, a unit variable cost of $70. and a unit selling price of $100. The maximum sales within the relevant range are $500,000.
a.Construct a cost-volume-profit graph.
b.Estimate the break-even sales (dollars) by using the cost-volume-profit graph constructed in part (a).
c.What is the main advantage of presenting the cost-volume-profit analysis in graphic form rather than equation form?

To determine

(a)

Concept introduction:

The Cost Volume Profit Graph is a graph representation that shows the relationship between the cost of product and these units by the using of total sale total cost and total fixed cost.

To construct:

A cost volume profit graph.

Explanation

To determine

(b)

Concept introduction:

The break even sale is that point of sale where company recovers all fixed cost.

To compute:

The break even sale.

To determine

(c)

Concept introduction:

In the cost volume profit graph, all data like cost, breakeven point, sale volume etc is calculated as well as shown on the graph.

In the cost volume profit equation,all data like cost, breakeven point, and sale volume etc is calculated by the equation.

Main Advantage of presenting the cost volume profit graph constructed rather than equation.

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