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Cost Volume Profit Analysis
The profit-volume chart
The profit–volume chart plots a single line depicting the profit or loss at each level of
activity. The breakeven point is where this line cuts the horizontal axis.
$000
20
10 Breakeven point
Number of units
0
800
200 1,000 1,200 1,400 1,600
(10)
(20)
The vertical axis shows profits and losses. The horizontal axis is drawn at zero profit
or loss. At zero activity the loss is equal to $20,000, that is, the amount of fixed costs.
The second point used to draw the line could be the calculated breakeven point or
the calculated profit for sales of 1,700 units.
The main advantage of the profit–volume chart is that it clearly depicts
the effect on profit and breakeven point of any changes in the variables.
Illustrations and further practice
Now try TYU 1 ‘Product PQ, TYU 2 ‘Swim Co’ and TYU 3 ‘Single Product’.
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