COST ACCOUNTING
COST VOLUME PROFIT ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Unit selling price, unit variable costs, and unit fixed costs are known and remain constant
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Proportion of different products will remain constant when multiple products are sold
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Costs may be separated into separate fixed and variable components
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Total revenues and total costs are linear in relation to output units
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Detailed explanation-1: -Under CVP analysis, the following basic assumptions are considered: The company is operating within the relevant range. Costs are classified into Variable Costs and Fixed Costs. It is assumed that all revenues and variable costs are constant per unit.
Detailed explanation-2: -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-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: -Which one of the following is not an assumption of CVP analysis? Profit for the period is constant.
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.