Question

2. (5 Points) Identify items a, b, and c in the cost-volume-profit graph shown below. $20,000 $18.000 $16,000 $14,000 $12,000 Dollars $10.000 $8.000 $6,000 $4.000 $2,000 0 200 400 600 300 1000 Volume 1200 1400 1600 1800 2000

Answer 1

1. The area 'b' shows loss area. The line which meets the $4000 is total expenses line and line below to the expenses is sales line.in this area total expenses line crosses the sales line , means total expenses > sales. This area shows total expenses is more than the sales.so total expenses - total sales = loss. this will leads to loss area .

2. The point at which sales equal to expenses called as break even point. At this point sales equals to expenses leads to no loss or no profit. This is called Break Even point. so the area C' shows the Break even point.

3. The area ' a' shows the profit area. In this area sales line crosses the total expense line. means sales> expenses. so total sales- expenses = profit this will leads to profit area.

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