Final answer:
In a CVP graph, the total cost line's intersection with the y-axis represents the total fixed costs, which are incurred regardless of production levels.
Step-by-step explanation:
The cost volume profit chart, often abbreviated CVP chart, is a graphical representation of the cost-volume-profit analysis. In other words, it's a graph that shows the relationship between the cost of units produced and the volume of units produced using fixed costs, total costs, and total sales. When constructing a CVP (Cost-Volume-Profit) graph, the place where the total cost line intersects the y-axis represents total fixed costs. This intersection point indicates the expenses that do not change regardless of the amount of goods or services a company produces.
At zero production, these fixed costs are present and they represent the cost incurred when there are no variable costs. As production increases, variable costs are added to fixed costs, and the total cost is the sum of the two. The CVP graph visually illustrates the relationship between the quantity of output produced and the cost of producing that output.