Question

Assume that a straight line on a CVP chart intersects the vertical axis at the level of fixed costs and has a positive slope that rises with each additional unit of volume by the amount of the variable costs per unit. What does this line represent?

Short answer

Answer

The line represents the total cost incurred by the business entity.

Step-by-step solution

Definition of CVP Chart

The chart representing the CVP analysis on the graph is the CVP chart. This graph or chart reflects the relation between the cost and volume.

What does the line represent

The straight line represents the total cost of the company. It is represented by the sum of fixed and variable costs incurred by the business entity at a different level of activity within the relevant range.