Which of the following is a characteristic of the cost-volume-profit graph?
A)It plots three separate lines.
B)It plots the total revenue line and the total cost line.
C)The vertical axis is measured in units sold, and the horizontal axis is measured in dollars.
D)It is hard to interpret.

Question

Quizplus · Accepted Answer

The cost-volume-profit graph plots the total revenue line and the total cost line. The intersection of these lines gives the breakeven point. The graph also shows the profit or loss region above or below the breakeven point. Option A is incorrect because the cost-volume-profit graph plots only two lines, i.e., total revenue and total cost. Option C is incorrect because the horizontal axis measures the quantity sold, while the vertical axis measures the dollars. Finally, option D is incorrect because, when interpreted correctly, the cost-volume-profit graph is an easy and effective tool for analyzing and planning business operations.

Which of the Following Is a Characteristic of the Cost-Volume-Profit