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Unformatted text preview: the point representing total sales dollars at the activity level you have selected. A volume of 100 shoes has again been selected. Sales at that activity level total $3,000 (100 pair of shoes × $30 per pair of shoe). Draw a line through this point back to the origin. Problem The interpretation of the completed CVP graph is given below: Solution Completed CVP graph showing break even point The break-even point is where the total revenue and total expense lines intersect. As discussed earlier, when sales are below the break-even point the company suffers a loss. Note that the loss (represented by the vertical distance between the total expense and total revenue lines) gets bigger as sales decline. When sales are above the break-even point, the company earns a profit and the size of the profit (represented by the vertical distance between the total revenue and total expense lines) increases as sales increase....
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- Spring '11
- Managerial Accounting, Binary relation, Euclidean geometry, cvp graph