Figure 9.8 shows a typical cost-volume-profit chart:

Required:

(a) Explain to a colleague who is not an accountant the reasons for the change in result on this cost-volume-profit chart from a loss at point

(a) to a profit at point (b). (3 marks)

(b) Identify and critically examine the underlying assumptions of this type of cost-volume—

profit analysis and consider whether such analyses are useful to the management of an organization.

Transcribed Image Text:

Figure 9.8 Volume (b) Total revenue Total costs Variable costs