When the Assumption of Linearity Is Applied to Revenue in CVP

question 103

Multiple Choice

When the assumption of linearity is applied to revenue in CVP analysis:

• A) Fixed cost per unit increases as revenue decreases
• B) Variable cost per unit is linear with respect to total revenue
• C) The sales mix and all of the prices remain constant
• D) The sales mix remains constant, but prices decrease as volumes increase

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Definitions:

Salvage Value

The projected value of an asset when it reaches the end of its functional lifespan.

Profit Comparisons

The process of analyzing changes in profit metrics over time or against industry benchmarks to gauge financial health or performance.

Economic Differences

The variations in economic conditions and outcomes among different regions, populations, or time periods, often studied to improve economic policies.

Salvage Value Proportions

Estimated residual value of an asset after its useful life, represented as a portion of its original cost.