Which of the following are considered as the limitations of Cost-Volume-Profit analysis? A. Constant…
Cost-Volume-Profit (CVP) and break-even analysis rest on restrictive simplifying assumptions that act as limitations: selling price per unit is assumed constant regardless…
Choose your answer
Which of the following are considered as the limitations of Cost-Volume-Profit analysis?
A. Constant selling price regardless of sales volume
B. Firm efficiency and productivity are constant and the costs are linear
C. Margin of safety is constant at varied levels of sales
D. Sales mix and the inventory levels are constant
E. Profit is constant at varied levels of sales price
Answer and explanation
Correct answer D
Cost-Volume-Profit (CVP) and break-even analysis rest on restrictive simplifying assumptions that act as limitations: selling price per unit is assumed constant regardless of volume (A), firm efficiency and productivity are assumed constant with strictly linear total cost functions (B), and the sales mix and inventory levels are assumed constant (D).
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UGC NET Commerce