Data extracted from the accounting information system of TXC Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x. The point where the dashed line intersects the solid line is the
A) Variable cost per unit
B) Breakeven point
C) Unit contribution margin
D) None of the above

Question

Data extracted from the accounting information system of TXC Corporation produced the following graph. The equation of the dashed line is y = $25x; the equation of the solid line is y = $200 + $5x.  The point where the dashed line intersects the solid line is the
A) Variable cost per unit 
B) Breakeven point 
C) Unit contribution margin 
D) None of the above

Quizplus · Accepted Answer

The point where the dashed line intersects the solid line is the breakeven point, which is where the company's total revenue equals its total cost. At this point, the company is not making a profit or a loss. This point is important to determine because any sales above the breakeven point will generate a profit, while sales below the breakeven point will result in a loss. Therefore, B is the best choice. A is incorrect because the variable cost per unit cannot be determined from the graph. C is incorrect because the unit contribution margin is not related to the intersection of the two lines. D is incorrect because the intersection of the two lines has significance in determining the breakeven point.

Data Extracted from the Accounting Information System of TXC Corporation