COST ACCOUNTING
COST VOLUME PROFIT ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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only
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only
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, (2) and (3)
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and (3) only
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Detailed explanation-1: -Which statement is true about cost-volume profit (CVP) analysis? CVP analysis can be used in both single-product and multi-product firms.
Detailed explanation-2: -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-3: -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-4: -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.