Explain CVP graph movements on line 3, line 9, and break-even point (in terms of unit and in terms of total $ sales) by describing it as shifting line up (down) / having a steeper (flatter) slope / points increase (decrease) / remain unchanged / direction is uncertain. Each scenario below is independent.
- To do: Adjust your excel graph and save under each scenario. Explain in the write ups how you changed your graph in that scenario and how the graph changes from the original scenario. Use printscreen to make it evident.
- Possible terms for lines 3&9: Remain unchanged; Shift (up/down ward); Have a (steeper/flatter) slope; Shift upward and Have a (steeper/flatter) slope; Shift downward and Have a (steeper/flatter) slope
- Possible terms for breakeven point: Remain unchanged; increase, decrease, probably change but uncertain
independent scenario | Line 3 | Line 9 | Break-Even Point |
---|---|---|---|
Example: The unit selling price increases from $160 to $180. | Remain unchanged. | steeper slope | Decrease. |
Scenario A: Two thousand more units are sold during the period than were budgeted. | |||
Scenario B: Due to an increase in the cost of materials, both unit variable expenses and the selling price are increased proportionately to achieve the same level of contribution margin earned. | |||
Scenario C: Due to automating an operation previously done by workers, fixed expenses are increased by $12,000 per period and unit variable expenses are reduced by $4 |