The conventional CVP (Cost-volume and profit) analysis has some underlying assumptions regarding costs and selling price. Which one of the following is NOT one of those assumptions: a. The selling price per unit will remain unchanged. b. Fixed costs per unit will decrease. c. The costs can be expressed as straight lines in a BEP (Break-even-point) graph. d. The actual variable costs per unit vary over the production range.
The conventional CVP (Cost-volume and profit) analysis has some underlying assumptions regarding costs and selling price. Which one of the following is NOT one of those assumptions: a. The selling price per unit will remain unchanged. b. Fixed costs per unit will decrease. c. The costs can be expressed as straight lines in a BEP (Break-even-point) graph. d. The actual variable costs per unit vary over the production range.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The conventional CVP (Cost-volume and profit) analysis has some underlying assumptions regarding costs and selling price. Which one of the following is NOT one of those assumptions:
a. The selling price per unit will remain unchanged.
b. Fixed costs per unit will decrease.
c. The costs can be expressed as straight lines in a BEP (Break-even-point) graph.
d. The actual variable costs per unit vary over the production range.
Expert Solution
Step 1
Cost volume profit analysis -
This analysis shows how a change in variable cost and change in fixed cost will affect the profit of the companies.
This also helps in knowing how many units a company needs to sell to break all the costs. this point is known as the break-even point.
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