Cost-volume-profit analysis includes some inherent,simplifying assumptions.Which of the following is not one of these assumptions?
A)Cost and revenues are predictable and are linear over the relevant range.
B)Variable costs fluctuate proportionally.
C)Changes in beginning and ending inventory levels are insignificant in amount.
D)Sales mix will change as fixed costs increase beyond the relevant range.

Question

Quizplus · Accepted Answer

The assumption that sales mix remains constant is a key simplification in cost-volume-profit analysis. Option D contradicts this assumption, as it suggests that fixed costs may vary based on changes in sales mix. Options A, B, and C are all valid assumptions in cost-volume-profit analysis.

Cost-Volume-Profit Analysis Includes Some Inherent,simplifying Assumptions