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Handout
Breakeven (or Cost Volume Profit CVP) Charts
Page 1
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Breakeven therefore will be in two parts, (1) Either in finding the sale quantity that an organisation need to achieve to make zero profit (2) Finding the sales revenue that organisation needs to achieve to make zero profit
In the CVP charts it is important to know the variables that are represented on the Y-axis, or the dependent variable, since it will be a sad mistake to do in using CVP charts without knowing which variables are dependent variables and which variables are independent variables (X- axis)
Note that in a CVP chart, the independent variable (X- axis) is where we always label as the number of units or the level of activity.
The Y-axis for each CVP chart is different and it is important to know which variables are used to label the Y-axis for each of the different CVP charts.
Page 2
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The labelling of the Y-axis for each of the CVP charts is as follows: Breakeven chart o Total sales revenue (TR) o Total Cost (TC) o Total Fixed Cost (FC) Contribution chart o Total sales revenue (TR) o Total Cost (TC) o Total Variable Cost (VC) Profit volume chart o Profit o Loss
BREAKEVEN CHART
Total revenue Total cost TR
TC
Total fixed cost
BEP
FC
Budgeted sales
Page 3
TR
Total revenue Total cost Total variable cost TC
BEP VC
Margin of safety
Budgeted Sales
Page 4
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Profit/Volume Chart
`Profit
Contribution
Loss
Page 5