Break-even, contribution and profit—volume graph

(a) From the following information you are required to construct:

(i) a break-even chart, showing the break-even point and the margin of safety;

(ii) a chart displaying the contribution level and the profit level;

(iii) a profit—volume chart.


6000 units at

£12 per unit = £72 000

Variable costs

6000 units at

£7 per unit = £42 000

Fixed costs

= £20 000

(b) State the purposes of each of the three charts in (a) above.

(c) Outline the limitations of break-even analysis.

(d) What are the advantages of graphical presentation of financial data to executives?