CAF-5 · Chapter 13 · Question 6 of 10
On a Profit-Volume (PV) chart, what does the y-intercept (the point where the profit line crosses the vertical axis at zero sales volume) represent?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) The total fixed costs (represented as a maximum loss)
Explanation
On a Profit-Volume (PV) chart, if sales volume is zero, the company earns zero contribution and therefore incurs a loss exactly equal to its total fixed costs. This is represented by the y-intercept below the zero-profit line.
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