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 cost line which includes both fixed and variable costs. Option A is incorrect because area CDE represents the area of profit, not loss. Option B is incorrect because line AC represents total cost, not just fixed cost. Option C is incorrect because point D represents the point at which total contribution (not the contribution margin per unit) equals total fixed costs, leading to zero profit.

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