Question

In response to a request from your immediate supervisor, you have prepared a CVP graph portraying the cost and revenue characteristics of your company’s product and operations.   Explain how the lines on the graph and the be point would change if

1 - the selling price per unit decreased

2 - the fixed cost increased throughout the entire range of activity and

3 - variable cost per unit increased.

Answer 1

a)

If selling price per unit decrease the profit will increase

The CVP grapg look like this

b)

If fixed cost increased throughout the entire range of activity portrayed on the graph then the fixed cost cost curve shifts up As shown in graph (F.C 2)

c)

If variable cost per unit increased then then CVP graph will look like this

If selling price decrease then profit will increase

(for example: 1(unit) cost $2 variyabul cost and price is 5

                     1(unit) cost $3 variyabul cost and price is 6

If variyable cost increase then price increase if price increase then sales decrease .......