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Unformatted text preview: 14. Linda Fern asks your help in constructing a CVP graph. Explain to Linda (a) how the break-even point is plotted, and (b) how the level of activity and dollar sales at the break-even point are determined .-To plot the break-even point you must first graph the fixed costs and the intersection of sales volume graph with the variable costs line. Fixed cost is best represented with a horizontal line that is parallel to the x-axis. The variable cost graph will be representing an increase in dollars (y-axis) as the volume of activity increases (y-axis). The sales volume will be represented by an increase in revenue with an increase in volume. The point in which the sales volume graph intersects the variable cost line is the break-even point. The y coordinate of the point represents the amount of sales the company needs to recover all of its profits. The x coordinate represents the amount of activity a company will reach to get to that the point....
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This note was uploaded on 11/06/2011 for the course ACCT 231 taught by Professor Shan during the Spring '10 term at Allen University.
- Spring '10