ECONOMICS

Detailed explanation-1: -Here are some assumptions about the use of CVP analysis in business. CVP analysis costs can be segregated into fixed and variable portions and total fixed costs remain constant at all output levels. In CVP, cost linearity is preserved over the relevant range, and revenues are constant per unit.

Detailed explanation-2: -Assumptions made in cost-volume-profit analysis To summarize, the most important assumptions underlying CVP analysis are: Selling price, variable cost per unit, and total fixed costs remain constant through the relevant range.

Detailed explanation-3: -Which of the following is an underlying assumption of cost-volume-profit analysis? Costs can be divided into fixed and variable components. Within the relevant range of operating activity, the efficiency of operations does not change.

Detailed explanation-4: -Cost-Volume-Profit Analysis (CVP analysis), also commonly referred to as Break-Even Analysis, is a way for companies to determine how changes in costs (both variable and fixed) and sales volume affect a company’s profit.