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.
Homework Answers
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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