COST ACCOUNTING
COST VOLUME PROFIT ANALYSIS
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Expenditure costs incurred in a production
|
|
|
The selling price, variable costs per unit, and total fixed costs remain constant over the relevant ranges
|
|
|
Selling price, variable cost per unit, and total cost are not constant in the relevant time
|
|
|
Fixed costs and variable costs that are not constant in time are irrelevant
|
Detailed explanation-1: -The reliability of CVP lies in the assumptions it makes, including that the sales price and the fixed and variable cost per unit are constant. The costs are fixed within a specified production level. All units produced are assumed to be sold, and all fixed costs must be stable.
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: -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: -The CVP model assumes that revenues and total costs are linear over the relevant range of activity. to remember that the calculations performed within the context of a given CVP model should not be used outside the relevant range.
Detailed explanation-5: -Explanation: Breakeven analysis assumes that all variable costs and revenues are constant on a per-unit basis and are linear over a relevant range. Fixed costs in total are constant.