US CMA Part 2 · Chapter 5 · Question 9 of 15
Which of the following is a standard assumption of cost/volume/profit analysis?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Selling price per unit and variable cost per unit are constant within the relevant range
Explanation
CVP analysis assumes linear revenue and cost functions within the relevant range: constant unit selling price, constant unit variable cost and constant total fixed costs. It also assumes production equals sales (no significant inventory change) and, for multiple products, a constant sales mix.
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