A profit-volume graph shows the impact on operating income from changes in the output level.

Question

Quizplus · Accepted Answer

A profit-volume graph, also known as a break-even chart, shows the relationship between sales volume and operating income. It can help a business understand how much revenue is needed to cover its costs and start generating profits. By plotting the total revenue and total cost curves, the graph shows the break-even point, where the business neither earns a profit nor incurs a loss. It also shows the levels of output where the business starts generating profits and the levels where it incurs losses. Therefore, a profit-volume graph does show the impact on operating income from changes in the output level.

A Profit-Volume Graph Shows the Impact on Operating Income from Changes