Question

Which one of the following is not an assumption of CVP analysis?

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.

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Answer #1

Answer: Profit for the period is constant

Explanations:

CVP Assumptions:

  • Sales price is constant
  • Variable cost per unit is constant
  • Total fixed cost is Constant
  • Sales mix is Constant
  • Units sold = Units produced

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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Answer #2
i.Profit for the period is constant - Not an assumption of CVP analysis
source: Byju's
answered by: Anup
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