Which of the following underlying assumptions form(s) the basis for cost-volume-profit analysis?
A) Revenues and costs behave in a linear manner.
B) Costs can be categorized as variable, fixed, or semivariable.
C) Worker efficiency and productivity remain constant.
D) In multiproduct organizations, the sales mix remains constant.
E) All the answers are assumptions that underlie cost-volume-profit analysis.

Question

Quizplus · Accepted Answer

Cost-volume-profit (CVP) analysis is based on several simplifying assumptions to make predictions about the financial outcomes of various sales and production levels. These assumptions include the linearity of revenues and costs within a relevant range (A), the ability to classify costs as variable, fixed, or semivariable (B), the constancy of worker efficiency and productivity (C), and, in the case of organizations that sell multiple products, the constancy of the sales mix (D). Therefore, all the given options are indeed underlying assumptions of CVP analysis.

Which of the Following Underlying Assumptions Form(s) the Basis for Cost-Volume-Profit