Which of the Following Is an Assumption Underlying Standard CVP

question 342

Multiple Choice

Which of the following is an assumption underlying standard CVP analysis?

• A) In multiproduct companies, the sales mix is constant.
• B) In manufacturing companies, inventories always change.
• C) The price of a product or service is expected to change as volume changes.
• D) Fixed expenses will change as volume increases.

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Definitions:

Fixed Overhead

Expenses that do not vary with production volume, including rent, salaries, and insurance.

Property, Plant, and Equipment

Long-term assets used in the operations of a business, not intended for sale.

Insurance

A financial product that provides protection against financial losses from specific risks, such as accidents, theft, or natural disasters.

Depreciation

A method to allocate the cost of a tangible asset over its useful life.