Answer: The best graph to illustrate June's situation is a cost-volume-profit (CVP) graph, which shows the relationship between the revenue, cost, and volume of goods sold.
In June's case, her fixed costs (the cost of the sewing machine) are constant and do not change regardless of the number of quilts she makes and sells. Her variable costs (the raw materials) are directly proportional to the number of quilts she makes and sell. Her revenue is directly proportional to the number of quilts she sells.
The CVP graph will show a line representing fixed costs, a line representing variable costs, and a line representing revenue. The point at which the total costs (fixed costs + variable costs) equal the revenue represents the break-even point, at which June neither makes a profit nor incurs a loss. Beyond this point, June will make a profit, and before this point, she will incur a loss.
The CVP graph can be used to determine the break-even point and to make predictions about the future financial performance of a business, based on changes in volume, costs, or price.
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