Question

Which of the following are assumptions of cost volume profit analysis?
A. Total cost and total revenue are affected by both volume and price changes. B. All costs can be classified as either fixed or variable.
C. Production volume is equal to sales volume.
D. In multi-product companies, the sales mix is constant. Confidence Level

Answer 1

Answer:

The correct answer are B and D

Explanation:

CVP stands for the Cost Volume Profit analysis, which is defined as the situation where the companies evaluate or determine what will happen financially when the selling price varies or change, the costs change or the production volume changes.

The assumptions of the CVP are:

1. Costs are linear and are designated either variable or fixed.

2. The selling price per unit will be constant and will not decrease/ increase grounded on volume.

3. In the case of the firm or business which sells the multiple products, the sales mix will be constant.