Which of the Following Is Not an Assumption About the Data

question 54

Multiple Choice

Which of the following is not an assumption about the data when using CVP analysis?

• A)All costs can be easily and accurately separated into fixed and variable components.
• B)Total fixed costs remain at a constant level and variable costs per unit remain unchanged at all sales levels.
• C)A linear relationship exists between variable costs and sales activity over the relevant range of interest.
• D)Inventory is sold in the period following purchase or manufacture.

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Definitions:

Adjusting Entry

A journal entry made at the end of an accounting period to update account balances to reflect accurate and fair financial statements.

Closing Entry

An accounting entry made at the end of an accounting period to transfer balances from temporary accounts to permanent accounts.

Income Summary

An account used in the closing process that summarizes revenues and expenses for a period, transferring the net income or loss to the owner's equity.

Revenue

The aggregate financial gain acquired by a company from its essential sales activities involving goods or services.