ECONOMICS

Detailed explanation-1: -When inventory levels fluctuate, CVP analysis gets more complicated. If pricing, unit costs, sales mix, operational efficiency, or other important variables change, the overall CVPA and linkages must be adjusted as well. Cost data are of limited value as a result of these assumptions.

Detailed explanation-2: -Limitations. CVP is a short run, marginal analysis: it assumes that unit variable costs and unit revenues are constant, which is appropriate for small deviations from current production and sales, and assumes a neat division between fixed costs and variable costs, though in the long run all costs are variable.

Detailed explanation-3: -Key Takeaways. Cost-volume-profit (CVP) analysis is a way to find out how changes in variable and fixed costs affect a firm’s profit.

Detailed explanation-4: -Which of the following do limitations of cost volume profit include? Not all costs can be classified as fixed or variable. Revenue changes may not be linear. Sales volume is the only cost driver.

Detailed explanation-5: -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.