Final answer:
The horizontal (x) axis on a CVP graph represents unit sales or output level. This independent variable helps in analyzing how different sales volumes affect a company's costs and profits, highlighting the breakeven point and overall profitability.
Step-by-step explanation:
When constructing a Cost-Volume-Profit (CVP) graph, the horizontal (x) axis represents unit sales or output level.
The CVP graph is a tool used in managerial accounting to show the relationship between an organization's costs (both variable and fixed), its sales volume, and its profit. Typically, the independent variable, which is plotted on the x-axis, represents the number of units sold or the output level. This makes the dependent variable, which is the total cost or revenue, represented on the vertical (y) axis. In algebraic terms, a straight-line graph follows the general form of y = mx + b, where 'm' is the slope and 'b' is the y-intercept.
The CVP graph is very insightful for businesses, as it illustrates the breakeven point, where total revenues are equal to total costs, and shows how changes in selling prices, costs, or volume can affect profits.
In a CVP (cost-volume-profit) graph, the horizontal (x) axis represents the unit of activity level or volume.
For example, if you are graphing the relationship between the number of units sold and the total revenue, the x-axis would represent the number of units (activity level) and the y-axis would represent the total revenue.
By plotting different activity levels on the x-axis and their corresponding values on the y-axis, you can observe how changes in activity level affect the total revenue, costs, and profits.