ICANManagement InformationCost-Volume-Profit Analysis2025

Under CVP analysis, which of the following best describes the 'angle of incidence' in a breakeven chart?

AThe point at which the total cost line intersects the vertical axis, representing fixed costs.
BThe angle formed between the total revenue line and the total cost line at the breakeven point, indicating the rate at which profit is earned beyond breakeven.CORRECT
CThe horizontal distance between the current activity level and the breakeven point, representing the margin of safety.
DThe slope of the variable cost line relative to the output axis, representing the variable cost ratio.
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Why the answer is B, and why the others tempt you.
The angle of incidence is the angle at which the total revenue line crosses the total cost line at the breakeven point. A wider angle indicates that profit is earned rapidly as sales exceed breakeven, reflecting a high P/V ratio and strong profitability. It is a qualitative indicator of profit-earning potential, distinct from the margin of safety (C) or fixed cost intercept (A).
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