Which of the following underlying assumptions does not form 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 mixed.
C)Worker efficiency and productivity remain constant.
D)In multi-product organizations, the sales mix remains constant over the relevant range.
E)In manufacturing firms, the sales mix varies based on the prior year's budget.

Question

Quizplus · Accepted Answer

The assumption that the sales mix remains constant over the relevant range is a fundamental assumption of cost-volume-profit analysis as it helps in determining the contribution margin and break-even point. However, the assumption that the sales mix varies based on the prior year's budget is not a basis for cost-volume-profit analysis, and it may not be relevant in all situations.

Which of the Following Underlying Assumptions Does Not Form the Basis