Which of the following business conditions may violate an assumption of CVP analysis?
I. Supplier volume discounts
II. Learning curves
III. Customer discounts
A) I and II only
B) II and III only
C) I, II, and III
D) I and III only

Question

Quizplus · Accepted Answer

CVP (Cost-Volume-Profit) analysis assumes that costs are fixed or variable and that the unit selling price, unit variable costs, and fixed costs are constant. Supplier volume discounts, learning curves, and customer discounts all introduce variability in costs or revenues that violate these assumptions. Supplier volume discounts and customer discounts affect the costs and selling price per unit, respectively, making them variable rather than constant. Learning curves imply that the more a task is performed, the lower the cost per unit due to increased efficiency, which also contradicts the assumption of constant costs.

Which of the Following Business Conditions May Violate an Assumption