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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Contribution margin, break-even sales, cost-volume-profit graph, and operating leverage

Organic Health Care Products Inc. expects to maintain the same inventories at the end of 20Y8 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during 20Y8. A summary report of these estimates is as follows:


It is expected that 400.000 units will be sold at a price of $25 a unit. Maximum sales within the relevant range are 500.000 units.

Instructions

Construct a cost-volume-profit graph indicating the break-even sales.

To determine

Concept Introduction:

Cost volume profit graph: This graph shows the sales, total cost and fixed cost and this helps to identify our breakeven point on graphical value.

To Construct:

The cost volume profit graph

Explanation

As given 500000 units is maximum ...

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