Profit is indicated on a cost-volume-profit graph by:
A)the vertical difference between zero and the break-even point.
B)the horizontal difference between the revenue line and the cost line.
C)the vertical difference between the revenue line and the cost line.
D)the horizontal distance between zero and the break-even point.

Question

Quizplus · Accepted Answer

The vertical difference between the revenue line and the cost line on a cost-volume-profit graph represents the profit. At the break-even point, the revenue and cost lines intersect and the vertical difference between them is zero. As sales increase beyond the break-even point, the revenue line is higher than the cost line, resulting in a positive vertical distance that indicates the profit. Conversely, if sales decrease, the cost line is higher and the vertical distance becomes negative, indicating a loss. Therefore, choice C is the correct answer.

Profit Is Indicated on a Cost-Volume-Profit Graph By