Which of the Following Items Is NOT an Assumption of CVP

question 202

Multiple Choice

Which of the following items is NOT an assumption of CVP analysis?

• A)Total costs can be divided into a fixed component and a component that is variable with respect to the level of output.
• B)When graphed, total costs curve upward.
• C)The unit-selling price is known and constant.
• D)All revenues and costs can be added and compared without taking into account the time value of money.

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Definitions:

Relative Liquidity

A measure of the ease with which an asset can be converted into cash without affecting its market price, compared to other assets.

Music Store Business

A commercial establishment that sells musical instruments, sheet music, and/or recorded music.

Gross Method

An accounting method for recording purchases at the invoice's full amount without deducting any cash discounts.

Gross Profit

The difference between sales revenue and the cost of goods sold, before deducting overheads, payroll, taxation, and interest.