What is the line F? What is the area A? What is the line C? What is point B? What is the area K?

Solutions

Expert Solution

What is line F?	Fixed cost
What is the area A?	Loss
What is the line C ?	Revenue
What is point B ?	Break even point
What is the area K?	Margin of safety

Explanation :

Line F: It indicates fixed cost. Fixed cost is constant up-to a certain volume of production that is why it is represented by a straight line.

Area A: It indicates the area of loss. In that area total cost is higher than total revenue.

Line C : It indicates revenue. Revenue starts from 0. When there is no production ,then there is no revenue. It starts from 0 and increase with number of units produced and sold .

Point B: It represents break even point . It is the point where there is no profit and no loss. Total cost = Total revenue

Area K = It represents margin of safety. Margin of safety = Actual sales - BEP sales

ekkarill92 answered 2 years ago

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