A cost-volume-profit graph is frequently used in business meetings because it presents a picture of cost relationships within a company. Briefly describe the type of information and data that you would need in order to prepare a CVP graph. After a CVP graph is prepared what are the major points that could be made from the graph that would be of interest to management?

To begin constructing a CVP graph information is needed concerning the maximum estimated level of sales units and the unit sales price. This is necessary to create the axes and also to plot the total revenue line from the origin. In addition the costs must be broken down into fixed and variable components in order to plot both the fixed cost line and the total cost line.
Using a CVP graph management can readily identify the break-even point and can see how much profit or loss would result from varying levels of sales. The graph also makes it easy to portray the effects of any changes such as costs or selling prices.