COST ACCOUNTING
COST VOLUME PROFIT ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Difficult to distinguish costs exactly into variable or fixed
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The efficiency and productivity are to be unchanged
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Fluctuation in revenues or cost
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Selling price may be reduced to achieve greater volume of sales
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Detailed explanation-1: -The point of a CVP analysis is to determine how changes in variable and fixed costs will affect profits. What are the three elements of cost-volume-profit analysis? The three main elements are cost, sales volume and price. A CVP analysis looks at how these elements influence profit.
Detailed explanation-2: -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-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.