ECONOMICS

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COST ACCOUNTING

COST VOLUME PROFIT ANALYSIS

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Normally, the points x and y in the diagram represent the behavior of total cost and total revenue over a relevant range of output which is applicable in the long term period.
A
True
B
False
Explanation: 

Detailed explanation-1: -Total cost is the sum of variable cost and fixed cost, which means that the graph of total cost is a vertical shift of the graph of variable cost. TC(q) = V C(q) + F C.

Detailed explanation-2: -Break Even Analysis in economics, business, and cost accounting refers to the point in which total cost and total revenue are equal.

Detailed explanation-3: -The point where the total costs line crosses the total sales line represents the breakeven point. This is the point of production where sales revenue will cover the costs of production. In the above graph, the breakeven point stands at somewhere between 2000 and 3000 units sold.

Detailed explanation-4: -D. Profit is the difference between total revenue (TR) and total cost (TC).

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