Which one of the following is not an assumption of CVP analysis?
Profit for the period is constant.
The sales mix is constant.
Costs can be classified as variable or fixed.
Volume or level of activity affects costs.
Answer: Profit for the period is constant
Explanations:
CVP Assumptions:
Thus,
i.Profit for the period is constant - Not an assumption of CVP analysis
ii.The sales mix is constant - Assumption of CVP analysis
iii.Costs can be classified as variable or fixed - Variable cost per unit & Total fixed cost is constant as assumption of CVP analysis
iv.Volume or level of activity affects costs - Units sold = Units produced. So it affects the costs
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