A CVP graph such as the one shown below is a useful technique for showing relationships among an organizations costs, volume, and profits.

Required:

1. Identify the numbered components in the CVP graph.

2. State the effect of each of the following actions on line 3, line 9, and the break-even point.

a. The unit selling price is increased from $18 to $20.

b. Unit variable expenses are decreased from $12 to $10.

c. Fixed expenses are increased by $3,000 per period.

d. Two thousand more units are sold during the period than were budgeted.

e. Due to paying salespersons a commission rather than a flat salary, fixed expenses are reduced by $8,000 per period and unit variable expenses are increased by $3.

f. Due to an increase in the cost of materials, both unit variable expenses and the selling price are increased by $2.

g. Advertising costs are increased by $10,000 per period, resulting in a 10% increase in the number of units sold.

h. Due to automating an operation previously done by workers, fixed expenses are increased by $12,000 per period and unit variable expenses are reduced by $4.

B.

C.

D.

E.

F.

G.

H.

8 6 1 4 3 7 5 2 Req 1 Req 2A Req 2B Req 2c Re Identify the numbered components in the CVP graph. 1. 2. Break-even point 3. Dollars 4. Fixed expense area 5. 6. Loss area 7. Profit area 8. Sales line 9. Req 1 Req 2A Req 2B Req 2c Req 2D Req 2E Reg 2F Req 2G Req 2H State the effect of each of the following actions on line 3, line 9, and the break-even point. The unit selling price is increased from $18 to $20. Line 3 Line 9 Have a flatter slope. Break-even point Have a steeper slope. Remain unchanged. Shift downward and have a steeper slope. Shift downward. Chift unward and have a flattar clona