Which of the following statements is correct with regards to the underlying assumptions of CVP analysis?
A) A step up to the next relevant range of activity may incur an increase in fixed costs.
B) All costs can be classified as either fixed or variable.
C) The sales mix between multiple products is always the same.
D) All the above statements are correct.

Question

Quizplus · Accepted Answer

All the statements A, B, and C are correct assumptions underlying Cost-Volume-Profit (CVP) analysis. A) acknowledges that fixed costs may increase as activity levels reach new relevant ranges. B) is a fundamental assumption that costs can be categorized as either fixed or variable for CVP analysis. C) assumes a constant sales mix, which is crucial for multi-product CVP analysis.

Which of the Following Statements Is Correct with Regards to the Underlying