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### Horngren'S Financial And Managerial Accounting

Book edition 6th
Author(s) Tracie L. Miller-Nobles, Brenda L. Mattison
Pages 992 pages
ISBN 9780134486833

# Analyzing a cost-volume-profit graphNolan Rouse is considering starting a Web-based educational business, e-Prep MBA. He plans to offer a short-course review of accounting for students entering MBA programs. The materials would be available on a password-protected Web site; students would complete the course through self-study. Rouse would have to grade the course assignments, but most of the work would be in developing the course materials, setting up the site, and marketing. Unfortunately, Rouse’s hard drive crashed before he finished his financial analysis. However, he did recover the following partial CVP chart:Requirements 1. Label each axis, the sales revenue line, the total costs line, the fixed costs line, the operating income area, and the breakeven point. 2. If Rouse attracts 300 students to take the course, will the venture be profitable? Explain your answer. 3. What are the breakeven sales in students and dollars?

1. Blue line: Sales revenue; Green line: Total cost; Black line: Fixed cost; green portion: Operating income and an orange portion is reflecting operating loss.
2. The education business will suffer a loss on the admission of 300 students.