CVP analysis assumes that the only factor that affects costs is a change in sale price.

Question

Quizplus · Accepted Answer

CVP analysis examines the relationship between revenue, cost, and volume of products sold. It assumes that costs can be divided into fixed and variable components and that changes in volume (i.e. sales) are the primary driver of changes in total costs. Therefore, changes in sale price are not the only factor that affect costs in CVP analysis. Other factors such as changes in variable costs, fixed costs, or the sales mix can also impact costs and profits.

CVP Analysis Assumes That the Only Factor That Affects Costs