Which of the Following Is NOT an Underlying Assumption of Cost-Volume-Profit

question 140

Multiple Choice

Which of the following is NOT an underlying assumption of cost-volume-profit analysis?

• A) We can classify expenses into fixed and variable categories.
• B) In multiproduct companies, sales mix will be constant.
• C) Revenues and expenses are linear over the relevant range.
• D) The inventory level changes significantly during the period.

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Definitions:

Basis

The amount of investment in a property for tax purposes, used to calculate gain or loss on the sale or other disposition of the property.

Condemnation Proceeds

Financial compensation received when property is taken by a government authority through eminent domain.

Recognized Gain

The amount of profit that is realized from the sale of assets that must be reported for tax purposes.

Adjusted Basis

The original cost of a property adjusted for factors such as depreciation or improvements, used to calculate capital gains or losses for tax purposes.