ECONOMICS

Detailed explanation-1: -The assumptions underlying CVP analysis are: The behavior of both costs and revenues is linear throughout the relevant range of activity. (This assumption precludes the concept of volume discounts on either purchased materials or sales.) Costs can be classified accurately as either fixed or variable.

Detailed explanation-2: -The main assumptions that accountants make when using cvp analysis are that fixed costs will not change within the relevant range of activity, all costs can be classified into fixed and variable, the selling price per unit will stay constant, and fixed costs remain constant.

Detailed explanation-3: -Overall fixed cost will remain constant but fixed costs per unit will decrease as volume increases. Therefore this statement as it is written is not an assumption o CVP analysis.

Detailed explanation-4: -The answer is b) Relevant range includes all possible levels of activity that a company might experience. The relevant range represents the range of production volume whereby the sales price per unit, variable cost per unit, and overall fixed cost do not change.