Saturday, February 20, 2010

Profit Graph

Profit graph is an improvement of a simple breakeven chart. It clearly exhibits the relationship of profit to volume of sales. The construction of a profit graph is relatively easy and the procedure involves the following:

  1. Selecting a scale for the sales on horizontal axis and another scale for profit and fixed costs or loss on vertical axis. The area above horizontal axis is called profit area and the one below it is called loss area.
  2. Plotting the profits of corresponding sales and joining them. This is profit line.

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