Which of the Following Underlying Assumptions Does Not Form the Basis

question 55

Multiple Choice

Which of the following underlying assumptions does not form the basis for cost-volume-profit analysis?

• A)Revenues and costs behave in a linear manner.
• B)Costs can be categorized as variable, fixed, or mixed.
• C)Worker efficiency and productivity remain constant.
• D)In multi-product organizations, the sales mix remains constant over the relevant range.
• E)In manufacturing firms, the sales mix varies based on the prior year's budget.

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Definitions:

Marginal Cost

The added expense incurred from producing an additional unit of a good or service.

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the total amount of output produced, indicating the cost per unit of output.

Marginal Cost

The production cost for one more unit of a product.

Marginal Cost Curve

A graphical representation showing how the cost of producing one additional unit of a good varies.