Data extracted from the accounting information system of Turner Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x. Which of the following terms best describes the graph?
A) Learning curve graph
B) Operating leverage graph
C) Margin of safety graph
D) Cost-volume-profit graph

Question

Data extracted from the accounting information system of Turner Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x.  Which of the following terms best describes the graph?
A) Learning curve graph 
B) Operating leverage graph 
C) Margin of safety graph 
D) Cost-volume-profit graph

Quizplus · Accepted Answer

The graph depicts the relationship between the company's volume of activity (x-axis) and its resulting level of profit (y-axis), given fixed costs ($200) and variable costs ($5/unit). This is a classic example of a Cost-Volume-Profit (CVP) graph, which helps managers visualize how changes in volume affect the company's profitability. The dashed line, which represents the variable costs, indicates that as production volume increases, so do the variable costs, while the solid line shows the total costs (fixed and variable). The intersection of the two lines represents the "break-even point," where the company is neither making nor losing money.

Data Extracted from the Accounting Information System of Turner Corporation