I get the following error message when framing and graphic is selected and “Cut Selected Graphics” is enabled.
Graphic is selected
“You have ‘cut selected graphics enabled’, but have not selected anything.”
I get the following error message when framing and graphic is selected and “Cut Selected Graphics” is disabled.
Layer is set to to output.
“You have no layers in your project set to output.”
Hard to say with your screenshots but I’m guessing that the graphic actually goes beyond the edge of the workspace which is why it’s not showing as an eligible selection or available for output.
Use the lower-left grid position and then make sure that the XY positions show as 0,0.