CIMA BA2 · Chapter 10 · Question 8 of 12
On a PROFIT-VOLUME (P/V) chart, what does the point where the profit line meets the vertical axis (at zero sales) represent?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) The loss equal to total fixed costs
Explanation
At zero sales there is no contribution, so the business makes a loss equal to its fixed costs. The profit line starts at this point and rises at a slope equal to the contribution per unit (or C/S ratio). The breakeven point is where the line crosses the horizontal axis.
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