COST ACCOUNTING
COST VOLUME PROFIT ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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On a typical break-even graph, units sold are shown on the vertical axis and both RM of sales and RM of costs are shown on horizontal axis.
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TRUE
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FALSE
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Explanation:
Detailed explanation-1: -A Break-Even Chart is constructed on a graph paper. Activity or volume of production is plotted on the ‘X’ axis, whereas cost and revenue are plotted on the ‘Y” axis.
Detailed explanation-2: -Total profit at the break-even point is zero.
Detailed explanation-3: -Answer and Explanation: A) the point where total profit equals total fixed expenses. This is incorrect because, at the break-even point, the total contribution margin and the total fixed costs are equal.
Detailed explanation-4: -The point where the total cost and revenue lines intersect is the break-even point. The amount of profit or loss at different output levels is represented by the distance between the total cost and total revenue lines.
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