Which of the Following Is Not an Underlying Assumption of a Conventional

question 42

Multiple Choice

Which of the following is not an underlying assumption of a conventional CVP analysis?

• A) Learning-curve effects (i.e., productivity gains with experience).
• B) Fixed costs, in total, do not change as sales mix or total sales volume change.
• C) Selling price per unit is unrelated to assumed sales volume.
• D) Inputs to the profit-planning model are known with certainty.
• E) Variable costs per unit are unrelated to changes in volume.

---

Definitions:

Effective Rate

The effective rate is the interest rate on a loan or investment, adjusted for the actual number of compounding periods per year, giving a true annual rate.

Compounded Nominal Rate

The rate at which interest is calculated on the initial principal and previously accumulated interest over a specific time period without considering the inflation.

Effective Rate

The annual interest rate on a loan or investment, taking into account the effect of compounding, as opposed to the nominal rate which does not.

Annuity

A financial scheme that guarantees a set sequence of disbursements to an individual, frequently used to secure income in retirement.