APPLY THE CONCEPTS: Use the CVP graph to analyze the effects of changes in price and costs

Graph the following on your own paper. At the original position, the break$-$even point in sales dollars is $$24,000$ at $500$ units. The fixed costs are $$8,000.$

When the two points of the total costs line are at the origin and the break$-$even point, you see that the slope of the line is $$32\mathrm{.}00,$ which means that the variable cost per unit is s

total costs lines intersect. Compare it to the original break$-$even point $(x).($You may want to put the lines back to their original position for each scenario.$)$

Each scenario should be considered independently.

$.$

A new supplier can provide a product of equal quality at $$4\mathrm{.}00$ per unit less than the current direct materials cost. If the new supplier is used, the slope of the total costs line will be $

$,$ and the break$-$even point in sales dollars decreases $.$

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$,$ which means that! $,$ units will need to be sold to break even.

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Changes in fixed cost will move the Total Cost Line straight up and down.

Changes to variable cost will cause the Total Cost Line to pivot around its starting point.

Changes to sales price will cause the Sales Line to pivot around its starting point.