Which of the Following Is $\textbf{ not }$

question 49

Multiple Choice

Which of the following is $\textbf{ not }$ an assumption about the data when using CVP analysis?

• A)All costs can be easily and accurately separated into fixed and variable components.
• B)Total fixed costs remain at a constant level and variable costs per
• C)More inventory is purchased than sold.
• D)A linear relationship exists between variable costs and sales activity over the relevant range of interest.

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Definitions:

Work in Process Inventory

Items that are partially completed during manufacturing, which are not yet ready for sale.

Direct Labor Costs

Costs that can be directly attributed to the production of goods or services, such as wages paid to workers manufacturing a product.

Net Operating Income

This is the income derived from normal business operations after deducting operating expenses but before interest and taxes.

Retained Earnings

The portion of net income left over for the business after it has paid out dividends to its shareholders, often reinvested in the business.