The following diagram is a cost-volume-profit graph for a manufacturing company:
- Select the answer that best describes the labeled item on the diagram.

Question

The following diagram is a cost-volume-profit graph for a manufacturing company: 
- Select the answer that best describes the labeled item on the diagram.

Quizplus · Accepted Answer

Line AC graphs total costs, as it represents the total of fixed costs and variable costs. Option A is incorrect because area CDE represents the area of net profit, not loss. Option B is incorrect because while line AC does represent fixed costs, it only represents the total fixed costs, not the graphing of them. Option C is incorrect because point D represents the breakeven point, not the point at which the contribution margin per unit increases.

The Following Diagram Is a Cost-Volume-Profit Graph for a Manufacturing