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.
|
Sales |
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?