Graphical Approach For Cvp Analysis (Break-Even Chart) Worksheet

Graphical Approach For Cvp Analysis (Break-Even Chart) Worksheet - Chapter 3 Page 5

Chapter 3

| Break-Even and Cost-Volume-Profit Analysis

Using Break-Even Charts for CVP Analysis when FC, VC, and S Change

Example 3.2 (c)

Answer the following referring to Example 7.5(a).

If the fixed costs increased by 20% per month, variable costs increased by $10 per chair, and

Jonathan increased the selling price per chair to $80, determine the new break-even volume and

new break-even revenue.

Solution

New FC = $5000.00(1 + 0.20) = $6000.00 per month

New VC = $40.00 per unit

New P = $80.00 per unit

Creating the new break-even chart

■

Drawing the New Fixed Cost Line

Draw the new horizontal line (AB) from A (0, 6000) to represent the New Fixed Cost line.

■

Drawing the New Total Revenue Line and New Total Cost Line

Graph the following linear functions:

■

Total Revenue function, TR = P × Q = 80.00 × Q

■

Total Costs function TC = (VC × Q) + FC = (40.00 × Q) + 6000.00

Create a table of values when Q = 0 and 300 (maximum quantity) and choose Q = 100

(any number in between) as the third point.

100

300

8000

24,000

6000

10,000

18,000

Using these coordinates, construct OC to represent the New Total Revenue line and AD

to represent the New Total Cost line.

Determining the new break-even volume

The x-coordinate of the break-even point (E) is 150.

Therefore, the break-even volume is 150 chairs.

Determining the new break-even revenue

The y-coordinate of the break-even point (E) is $12,000.00.

Therefore, the break-even revenue is $12,000.00.

Graphical Approach For Cvp Analysis (Break-Even Chart) Worksheet - Chapter 3 Page 5