Cost-Volume-Profit Chart

For the coming year, Cabinet Inc. anticipates fixed costs of $62,000, a unit variable cost of $75, and a unit selling price of $125. The maximum sales within the relevant range are $500,000.

a. Construct a cost-volume-profit chart on a sheet of paper. Indicate whether each of the following levels of sales is in the operating profit area, operating loss area, or at the break-even point.

1,000 units
2,000 units
$250,000
4,000 units
$450,000

b. Estimate the break-even sales (dollars) by using the cost-volume-profit chart constructed in part (a). $

c. What is the main advantage of presenting the cost-volume-profit analysis in graphic form rather than equation form?

The graphic format permits the user (management) to visually determine the for any given level of sales.