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.

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Definitions:

Positive Economics

The branch of economics that concerns the description and explanation of economic phenomena, focusing on facts and cause-and-effect relationships without making judgments.

Normative Economics

The branch of economic analysis that makes prescriptions about the way the economy should work.

Allocatively Efficient

A situation where resources are distributed in a way that maximizes the net benefit to society, often where marginal cost equals marginal benefit.

Productively Efficient

A situation where goods or services are produced at the lowest possible cost, maximizing the allocation of resources.