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Hello Sir, I am not sure without the chart can you please explain this question to me? It is from BPP, the question is Cuckoo Co. I chose variant B, but the book shows the correct answer as D.
What does the solid line of the Period 5 PV chart indicate?
A) The cumulative sales as each product’s sales are in turn added to the sales mix
B) The cumulative profit/loss as each product’s contribution are in turn added to the sales mix
C) The average variable costs which will be incurred in the production and sale of the three products in this mix
D) The average profit which will be earned from the sales of three products in this mix
The solid line of the Period 5 PV chart typically represents the cumulative profit/loss as each product’s contribution is added to the sales mix.
The average profit which will be earned from the sales of three products in this mix.This is because the profit-volume chart illustrates how profits change with varying levels of sales, and the solid line reflects the average profit derived from the combined contributions of the products being sold.
Each product contributes to the overall profit, and the average profit line helps visualise the profitability of the sales mix over the specified period.
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