Refer to the data given in the preceding exercise for Dolphin Company.

In the preceding exercise

Dolphin Company manufactures two- person sailboats with a variable cost of $ 1,000. The sailboats sell for $ 1,750 each. Budgeted fixed manufacturing overhead for the most recent year was $ 11,000,000. Planned and actual production for the year were the same.

1. Production........................................ 22,000 units

Sales ................................................. 25,000 units

2. Production......................................... 10,600 units

Sales ................................................. 10,600 units

3. Production......................................... 11,000 units

Sales ................................................. 9,800 units

Required:

1. Prepare a cost-volume-profit graph for the company. (Scale the vertical axis in millions of dollars.)

2. Calculate Dolphin Company’s break- even point in units, and show the break- even point on the CVP graph.

3. Explain why variable costing is more compatible with your CVP graph than absorption costing would be.