Question

1. Cost-volume-profit analysis assumes all of the following EXCEPT:
a. total variable costs remain the same over the relevant range
b. units manufactured equal units sold
c. all costs are variable or fixed
d. total fixed costs remain the same over the relevant range

Answer 1

All are assumed except A. Total variable costs remain the same over the relevant range.

Cost-volume-profit analysis examines how changes in cost in volume affect income. Variable costs are ones that go up and down depending on production levels, so it would not make sense to assume that variable costs stayed the same over the relevant range.