COST ACCOUNTING
COST VOLUME PROFIT ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The sales price will remain unchanged per unit
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Fixed costs will decrease per unit
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The costs can be expressed as straight lines in a break-even graph
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The actual variable cost per unit must vary over the production range
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Detailed explanation-1: -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.
Detailed explanation-2: -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-3: -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-4: -Answer and Explanation: CVP analysis makes no assumptions related to beginning inventory and ending inventory.