profit-volume chart

Fig. 73 Profit-volume chart.

profit-volume chart

a conventional BREAKEVEN chart which has been rearranged to show the effect on profits or losses of changes in output or sales. Fig. 73 shows a typical profit-volume chart. Sales or output is measured along the horizontal axis and profits (or losses) on the vertical axis. With zero sales/output the firm experiences losses equal to the firm's fixed costs (OA). The breakeven output (OB) is the output at which the firm makes neither a profit nor a loss. Losses or profits can be measured in terms of the distance of the profit/volume line from the horizontal axis. The slope of the profit/volume line reflects the CONTRIBUTION per unit of sales output, that is the price per unit less its unit variable costs.