CHAPTER 7

Cost-Volume-Profit Analysis
ANSWERS TO REVIEW QUESTIONS
7-1

a. In the contribution-margin approach, the break-even point in units is calculated

using the following formula:

Break-evenpoint

fixed expenses
unit contribution margin

b. In the equation approach, the following profit equation is used:

sales volume unit variable sales volume
unit
fixed

0
in units expense
in units expenses
salesprice

This equation is solved for the sales volume in units.

c. In the graphical approach, sales revenue and total expenses are graphed. The
break-even point occurs at the intersection of the total revenue and total expense
lines.

McGraw-Hill/Irwin
Managerial Accounting, 8/e

2009 The McGraw-Hill Companies, Inc.

7-1

McGraw-Hill/Irwin
7-2

2009 The McGraw-Hill Companies, Inc.

Solutions Manual