COST-VOLUME-PROFIT GRAPHS

Lotts Company produces and sells one product. The selling price is $10, and the unit variable cost is $6. Total fixed costs are $10,000.

Required:

1. Prepare a CVP graph with ‘‘Units Sold'' as the horizontal axis and ‘‘$ Profit'' as the vertical axis. Label the break-even point on the horizontal axis.

2. repare CVP graphs for each of the following independent scenarios:

a. Fixed costs increase by $5,000.

b. Unit variable cost increases to $7.

c. Unit selling price increases to $12.

d. Assume that fixed costs increase by $5,000 and unit variable cost is $7.