Cost Volume Profit (CVP) Analysis Is Based on a Number

question 111

Multiple Choice

Cost volume profit (CVP) analysis is based on a number of limiting assumptions. Which of the following is not one of the assumptions of the CVP model?

• A) Production units equal sales units over the period.
• B) If the firm has a product mix, the mix remains constant.
• C) Cost behaviour is linear over the relevant range.
• D) CVP analysis only applies to a single-product firm.

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Definitions:

Money Supply

The total amount of money—cash, coins, and balances in bank accounts—in circulation within a country's economy at a specific time.

Prime Rate

The interest rate that commercial banks charge their most credit-worthy customers, often used as a reference for setting various interest rates.

Great Recession

A severe global economic downturn that occurred from late 2007 through mid-2009, marked by significant declines in housing prices and increased unemployment rates.

Required Reserve Ratio

The fraction of deposits that regulators require a bank to hold in reserve and not loan out, in order to ensure bank liquidity.