Business Accounting

Business Accounting
RBA1002 & RBA10x2

Chapter 3:

Straight Line Graphs

And
Break-even Analysis

Chapter 3 – Straight Line Graphs and Break-even Analysis Solutions Page 1

 Business Accounting

3.1 GRAPHS

Exercise 1

1.
C

13

10

0 1 2 3 4 5 Q

2.
Cost

0 50 100 150 200 250 Quantity

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3.
Price of Pizza

900

800

700

600

500

400

0 50 55 60 65 70 Number of pizzas sold

4.a)
Price

100

90

80

70

60

50

0 10 20 30 40 50 Quantity

b) Negative linear relationship

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Exercise 2
1(a) y = 3x + 6

Determine the y-intercept. Let x = 0 and solve for y.

y = 3(0) + 6

Therefore the y-intercept is 6. Coordinates (0;6)

Determine the x-intercept. Let y = 0 and solve for x.

0 = 3x + 6

3x = -6

x = -2

Therefore the x-intercept is -2 Coordinates (-2;0)

(0;6) 6
5
4
3
2
(-2;0) 1
-4 -3 -2 -1 x

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(b) Determine the slope of the graph.

Coordinates (0;6)
Coordinates (-2;0)

Δy
change∈ y
Δx
Slope = change∈ x or

6−0
=
0−(−2)

6 3
= 2 = 3 = 1

2(a)

2x + y = 10
Therefore: y = -2x + 10

Determine the y-intercept. Let x = 0 and solve for y.

y = -2(0) + 10

y = 10

Therefore the y-intercept is 10. Coordinates (0;10)

Determine the x-intercept. Let y = 0 and solve for x.

0 = -2x + 10

2x = 10

x=5

Therefore the x-intercept is 5 Coordinates (5;0)

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12
10 (0,10)
8
6
2
(5,0)
-4 -3 -2 -1 1 2 3 4 5 x

x + 3y = 12
Therefore: 3y = -x +12
1
y = - 3 x+ 4

Determine the y-intercept. Let x = 0 and solve for y.

1
y = - 3 (0) + 4

Therefore the y-intercept is 4. Coordinates (0;4)

Determine the x-intercept. Let y = 0 and solve for x.

1
0=- 3 x+4

1
3 x=4

x = 12

Therefore the x-intercept is 12 Coordinates (12;0)

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12
10
8
6
4 (0,4)
2 (12,0)
-4 -3 -2 -1 3 6 9 12 15 x

b) 2x + y = 10 or y = -2x + 10

Coordinates (0;10)
Coordinates (5;0)

Δy
change∈ y
Δx
Slope = or change∈ x

10−0
=
0−5

10 2
= −5 = -2 = - 1

1
x + 3y = 12 or y = - 3 x + 4

Coordinates (0;4)
Coordinates (12;0)
Δy change∈ y
Slope = Δ x or change∈ x

4−0
=
0−12

4 1
= −12 = - 3

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3.
y = -2x + 5

Determine the y-intercept. Let x = 0 and solve for y.

y = -2(0) + 5

Therefore the y-intercept is 5. Coordinates (0;5)

Determine the x-intercept. Let y = 0 and solve for x.

0 = -2x + 5

2x = 5

1
x=2
2

1 1
Therefore the x-intercept is 2 Coordinates (2 ;0)
2 2

6
5 (0,5)
4
3
2
1
1 (2 , 0)
2
-4 -3 -2 -1 1 2 3 4 5 x

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4 A(4;6) B(12;2)

Δy
change∈ y
Δx
Slope = or change∈ x

6−2
=
4−12

4 1
= −8 = - 2

Equation of a graph: y = mx + c, using the point A(4,6)

1
6 = - (4) + c
2
6 = -2 + c
8 = c
c = 8

1
Equation: y = - x + 8
2

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Exercise 3
1. a)
y

-2 -1 80 100 120 140 160 180 x

-2

-4

-6

b) A(80;-6) and B(100;-4)

Δy change∈ y
slope = Δ x or change∈ x

−4−(−6)
=
100−80

2
= 20

1
=
10

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C(120;-2) and D(140;0)

Δy change∈ y
slope = Δ x or change∈ x
0−(−2)
=
140−120

2
= 20

1
=
10

2. 3y + 4x = 12
3y = -4x + 12
4
Div by 3 y= - +4
3

y-intercept = 4

3. y = 2x + 3

Determine the y-intercept. Let x = 0 and solve for y.

y = 2(0) + 3

Therefore the y-intercept is 3. Coordinates (0;3)

Determine the x-intercept. Let y = 0 and solve for x.

0 = 2x + 3

2x = -3

−3
x=
2

1
x=-1 2

1 1
Therefore the x-intercept is - 1 Coordinates (- 1 ; 0)
2 2

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. y

6
5
4
3 (0,3)
2
1
(-1 ,0) 1
2
-4 -3 -2 -1 1 2 3 4 5 x

4. A(1;-4) B(-1;4)

Δy change∈ y
Slope = Δ x or change∈ x

4−(−4)
=
−1−1

8
= −2

4
= -4 = - 1

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 Business Accounting

5.a) Ice-cream sold is a dependent variable as the number of ice creams sold depends on
the temperature and the temperature is an independent variable.

Ice cream sold

350

300

250

200

150

100

0 26 28 30 32 34 36 Temperature

b) Positive linear relationship

c) (26;100) (28;150)

Δy change∈ y
slope = Δ x or change∈ x
150−100
=
28−26

50
= 2

25
= 25 = 1

6.
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a) A negative linear relationship

b) 1980(6.2 ; 143) and 1981(5.7 ; 156)

Δy change∈ y
slope = Δ x or change∈ x

156−143
=
5.7−6.2

13
= −0.5

26
= - 26 = - 1

1981(5.7 ; 156) and 1982(5.2 ; 169)

Δy change∈ y
Slope = Δ x or change∈ x

169−156
=
5.2−5.7

13
= −0.5

26
= -26 = - 1

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 Business Accounting

y = 5x - 3

7.

Determine the y -intercept. Let x = 0 and solve for y.

y = 5(0) - 3

Therefore the y-intercept is -3. Coordinates (0;-3)

Determine the x-intercept. Let y = 0 and solve for x.

0 = 5x - 3

5x = 3

3
x=
5

3 3
Therefore the x-intercept is 5 Coordinates ( 5 ; 0)

. y

3
1 ( ,0)
5
-4 -3 -2 -1 1 2 3 4 5 x

-3 (0,-3)

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 Business Accounting

8. 3y = -6x +15
Div by 3: y = -2x + 5

Determine the y -intercept. Let x = 0 and solve for y.

y = -2(0) + 5

Therefore the y-intercept is 5. Coordinates (0;5)

Determine the x-intercept. Let y = 0 and solve for x.

0 = -2x + 5

2x = 5

5 1
x= = 2
2 2
1 1
Therefore the x-intercept is 2 2 Coordinates (2 2 ; 0)

. y

5 (0,5)

1
1 (2 ,0)
2
-4 -3 -2 -1 1 2 3 4 5 x
-1

-3

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 Business Accounting

Exercise 4

1.

Price

25 (400,25)

20 (300,20)

15 (200,15)

10 (100,10)

5 (0,5)

0 100 200 300 400 500 Quantity

2.

15 (5,15)

9 (3.9)

3 (1,3)

(0,0)
0 1 3 5 x

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a) First quadrant

b) The points (2,6) and (4,12) also lie on the line (and many others)

c) There is a positive / direct linear relationship between the x- and y-coordinates.

If x increases by 1 unit, y increases by 3 units.

The y-coordinate is 3 times the x-coordinate.

3.

a) Use any two points on the graph

(4;12) (8;9)

Δy change∈ y
Slope = Δ x OR change∈ x

12−9
=
4−8

3
= −4

b) Determine c (y-intercept)
Use any point on the straight line graph and substitute in place of x and y, (12,6)

y = mx + c
3
6= (12) + c
−4
6 = -9 + c
c = 15
3
Therefore: y = x + 15
−4

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c) Determine the x-intercept. Let y = 0 and solve for x.

3
y= x + 15
−4
3
∴ 0= x + 15
−4
3
∴ x = 15
4
∴ x = 20

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 Business Accounting

3.2. Breakeven Analysis

1.

P Q FC VC TVC TC SALES PROFIT

45000 0 4 200 000 10 000 0 4 200 000 0 -4 200 000
45000 40 4 200 000 10 000 400 000 4 600 000 1 800 000 -2 800 000
45000 80 4 200 000 10 000 800 000 5 000 000 3 600 000 -1 400 000
45000 120 4 200 000 10 000 1 200 000 5 400 000 5 400 000 0
45000 160 4 200 000 10 000 1 600 000 5 800 000 7 200 000 1 400 000
45000 200 4 200 000 10 000 2 000 000 6 200 000 9 000 000 2 800 000
45000 240 4 200 000 10 000 2 400 000 6 600 000 10 800 000 4 200 000

∴ QBE = 120 (break-even units)

SBE = R 5 400 000 (break-even in Rands)

9000
2a) QBE = (4−1 ) = 3 000
SBE = 3 000 ¿ 4 = R 12 000

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(‘000 Rands) Total Sales Income

Profit

Total Costs (TC)

Variable Costs (VC)

12

9 Fixed Costs (FC)

Loss

0 3 Quantity
(‘000)
3.

P Q FC VC TVC TC SALES PROFIT

15 4 000 65 000 2.50 10 000 75 000 60 000 -15 000
15 4 400 65 000 2.50 11 000 76 000 66 000 -10 000
15 4 800 65 000 2.50 12 000 77 000 72 000 -5 000
15 5 200 65 000 2.50 13 000 78 000 78 000 0
15 5 600 65 000 2.50 14 000 79 000 84 000 5 000
15 6 000 65 000 2.50 15 000 80 000 90 000 10 000

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∴ QBE = 5 200
SBE = R 78 000

200000
4. a) QBE = (300−50) = 800
SBE = 800 ¿ 300 = R 240 000

(‘000 Rands)
Total Sales Income

Profit
Total Costs
TC)

Variable Costs (VC)

240
Break-even

200
Fixed Costs (FC)
Loss

0 800 Quantity (‘000)

Total contribution∈ Rands

5.1 Contribution ratio = x 100
Sales∈Rands
R 1 050 000
= x 100
R 1 800 000
= 58.33% of sales

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 Business Accounting

¿ cost
5.2 Break-even units =
Contribution per unit
R 700 000
=
R 35
= 20 000 units

Break-even sales = Break-even units x price

= 20 000 x R60
= R1 200 000

5.3 Margin of safety units = sales in units - breakeven in units

= 30 000 – 20 000
= 10 000 units

Margin of safety rands = margin of safety units x selling price per unit
= 10 000 x R60
= R600 000

6.1 Product A
¿ cost
Break-even units =
Contribution per unit
R 12 000
=
R 2.50−R 1.50
= 12 000 units

Break-even sales = Break-even units x price

= 12 000 x R2.50
= R30 000

Product B

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 Business Accounting

¿ cost
Break-even units =
Contribution per unit
R 12 000
=
R 2.00−R 1.40
= 20 000 units

Break-even sales = Break-even units x price

= 20 000 x R2.00
= R40 000

Product A

Margin of safety units = sales in units - breakeven in units

= 24 000 – 12 000
= 12 000 units

Margin of safety rands = margin of safety units x selling price per unit
= 12 000 x R2.50
= R30 000

Product B
Margin of safety units = sales in units - breakeven in units
= 40 000 – 20 000
= 20 000 units
Margin of safety rands = margin of safety units x selling price per unit
= 20 000 x R2.00
= R40 000

¿ cost
7.1 Break-even units =
Contribution per unit

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 Business Accounting

R 600 000
=
R 2 000−R 1200
= 750 units

Break-even sales = Break-even units x price

= 750 x R2 000
= R1 500 000

7.2 Margin of safety units = sales in units - breakeven in units

= 930 – 750
= 180 units
Margin of safety rands = margin of safety units x selling price per unit
= 180 x R2 000
= R360 000

Total contribution∈ Rands

7.3 Contribution ratio = x 100
Sales∈Rands
R 800 x 930
= x 100
R 2 000 x 930
= 40% of sales

Chapter 3 – Straight Line Graphs and Break-even Analysis Solutions Page 25