Which of the Following Is an Underlying Assumption of CVP

question 81

Multiple Choice

Which of the following is an underlying assumption of CVP analysis?

• A)Factors other than changes in activity may affect costs.
• B)Cost classifications are reasonably accurate.
• C)Increases in inventories cause increase in total fixed costs.
• D)Unit costs remain the same over the relevant range.

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Definitions:

Least Elastic

Refers to the degree of responsiveness or sensitivity of demand or supply to changes in prices, with the least elastic being the least responsive.

Straight-Line Demand

Straight-Line Demand refers to a demand curve that shows a constant rate of change in the quantity demanded as price changes.

Percentage of Income

A measure indicating what portion or ratio of one's income is allocated to a specific expenditure or category.

Unit Elastic

Describes a situation in which the percentage change in quantity demanded is equal to the percentage change in price, leading to no change in total revenue.