Which of the Following Statements About a Cost-Volume-Profit Graph Is

question 3

Multiple Choice

Which of the following statements about a cost-volume-profit graph is correct?

• A) A cost-volume-profit graph is prepared with activity (number of units) on the vertical axis.
• B) The intersection of the total sales line and the total cost line represents the break-even point.
• C) The area above the break-even point represents the area of loss.
• D) The total cost line intersects the vertical axis at the dollar amount of total variable costs.

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Definitions:

Income

The amount of revenue that remains after deducting the costs, expenses, and taxes related to earning that revenue.

Break-even Point

The point at which total costs and total revenue are equal, meaning there is no net loss or gain, and one is "breaking even."

Contribution Margin

The amount remaining from sales revenue after all variable expenses are deducted, indicating how much contributes to covering fixed costs and generating profit.

Variable Costs

Costs that change in proportion to the level of production or sales activity within a business.