Cost/volume/profit Analysis Is a Technique Available to Management to Understand

question 75

Multiple Choice

Cost/volume/profit analysis is a technique available to management to understand better the interrelationships of several factors that affect a firm's profit.As with many such techniques,the accountant oversimplifies the real world by making assumptions.Which of the following is not a major assumption underlying CVP analysis?

• A)All costs incurred by a firm can be separated into their fixed and variable components.
• B)The product selling price per unit is constant at all volume levels.
• C)Operating efficiency and employee productivity are constant at all volume levels.
• D)In multi-product situations,the sales mix is assumed to be constant in both units and dollars.
• E)Total costs vary only with changes in volume.

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Definitions:

Single Category Average

A measure that represents the average value within a specific, singular category of data.

Investment Portfolio

A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including mutual funds and ETFs.

Recognize

In tax terminology, to report and include a transaction in taxable income for the period it was realized, regardless of whether or not payment was received.

Gain

An increase in the value of an investment or asset.