Question:
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.
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Sales
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6000 units at
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£12 per unit = £72 000
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Variable costs
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6000 units at
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£7 per unit = £42 000
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Fixed costs
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= £20 000
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(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?