course hero which of the following is not an assumption underlying cost-volume-profit analysis?

What are the assumptions of Cost Volume Profit Analysis?

A number of assumptions underlie cost-volume-profit (CVP) analysis: These cost volume profit analysis assumptions are as follows: Selling price is constant. The price of a product or service will not change as volume changes. Costs are linear and can be accurately divided into variable and fixed elements.

What are the assumptions of CVP analysis?

The following are the assumptions of the CVP analysis :- 1. Selling price, variable cost per unit, and total fixed costs all will remain constant through out the relevant range. 2. In multi-product si view the full answer

Can total costs be divided into fixed and variable components?

A) Total costs can be divided into a fixed component and a component that is variable with respect to the level of output. Which of the following is true of CVP analysis? A) Costs may be separated into separate inventoriable and period components with respect to the level of output.

Is the behavior of revenues and expenses accurately portrayed as linear?

The behavior of revenues and expenses is accurately portrayed as linear over the relevant range. D. The number of output units is the only driver. A. The time value of money is incorporated in the analysis.

Which is not an underlying assumption for cost volume profit analysis?

CVP analysis makes no assumptions related to beginning inventory and ending inventory. Since CVP is applied when using the variable costing model the change in inventory is not factored into the financials and thus is not an underlying assumption.

Which of the following fixed costs normally will not include *?

Answer and Explanation: The correct answer is B. Direct labor. Direct labor is a variable cost because the cost of labor will vary on the units produced by the company during the period.

What is the example of variable cost?

Variable costs are costs that change as the volume changes. Examples of variable costs are raw materials, piece-rate labor, production supplies, commissions, delivery costs, packaging supplies, and credit card fees.

Which management function is CVP analysis most applicable?

The organizational function of management is where CVP analysis is most applicable, as this gives managers a sense of what they will need and how much they need to produce to break even and make profits.

Which of the following is not a fixed cost Mcq?

Wages paid to workers however can vary as the number of workers increase or decrease. Hence it is not considered as a fixed cost.

Which of the following is a fixed cost Mcq?

Expenditure on machines is a fixed cost because it recurs in the same amount per period throughout the useful life of an asset and it cannot be considered a variable cost since it does not vary with activity volume.

Which of the following is a variable cost Mcq?

Wages paid to the factory labour are costs that are directly proportional to the level of production. If zero output is being produced then these costs do not have to be incurred. These costs vary with the level of output produced. Therefore, they are classified as variable costs.

Which one is called as variable cost Mcq?

Variable Cost is also known as direct costing.

Which is the variable cost Mcq?

Answer» c. costs that change with the level of production.

What are the 4 assumptions of CVP analysis?

(i) All costs can be resolved into fixed and variable elements. (ii) Over the activity range being considered costs and revenues behave in a linear fashion. (iii) The only factor affecting costs and revenues is volume. (iv) The technology, production methods and efficiency remain unchanged.

Which of the following is an underlying assumption of cost-volume-profit analysis?

The assumptions underlying CVP analysis are: The behavior of both costs and revenues is linear throughout the relevant range of activity. (This assumption precludes the concept of volume discounts on either purchased materials or sales.) Costs can be classified accurately as either fixed or variable.

Which of the following is an assumption of cost volume profit CVP analysis?

Which of the following is an assumption of CVP analysis? Total cost can be divided into a fixed component and a component that is variable with respect to the level of output.

Which of the following is generally a fixed cost?

Fixed costs include any number of expenses, including rental lease payments, salaries, insurance, property taxes, interest expenses, depreciation, and potentially some utilities. For instance, someone who starts a new business would likely begin with fixed costs for rent and management salaries.

Which of the following are examples of fixed costs quizlet?

Examples of fixed costs include straight-line depreciation, insurance, property taxes, rent, supervisory salaries, administrative salaries, and advertising. Unlike variable costs, fixed costs are not affected by changes in activity.

Is depreciation a fixed cost?

Is depreciation a fixed cost? Depreciation is a fixed cost using most of the depreciation methods, since the amount is set each year, regardless of whether the business' activity levels change.

Is direct Labour a fixed cost?

Fixed costs include various indirect costs and fixed manufacturing overhead costs. Variable costs include direct labor, direct materials, and variable overhead.

Why use CVP analysis?

A. use CVP analysis because it assumes certainty.

What is operating income area?

D) The operating income area is the section where the total costs line is above the total revenues line.

Can cost be separated into inventoriable and period components?

A) Costs may be separated into separate inventoriable and period components with respect to the level of output.

Is total revenues linear or non linear?

B) Total revenues and total costs are linear in relation to output units.

Is the behavior of revenues and expenses linear?

C. The behavior of revenues and expenses is accurately portrayed as linear over the relevant range.

Is the time value of money incorporated in the analysis?

A. The time value of money is incorporated in the analysis.

Can total costs be divided into a fixed component and a component that is variable with respect to the level of output?

A) Total costs can be divided into a fixed component and a component that is variable with respect to the level of output.

What are the assumptions of CVP?

A number of assumptions underlie cost-volume-profit (CVP) analysis: These cost volume profit analysis assumptions are as follows: 1 Selling price is constant. The price of a product or service will not change as volume changes. 2 Costs are linear and can be accurately divided into variable and fixed elements. The variable element is constant per unit, and the fixed element is constant in total over the relevant range. 3 In multi-product companies, the sales mix is constant. 4 In manufacturing companies, inventories do not change. The number of units produced equals the number of units sold.

Is cost linear or variable?

Costs are linear and can be accurately divided into variable and fixed elements. The variable element is constant per unit, and the fixed element is constant in total over the relevant range. In multi-product companies, the sales mix is constant. In manufacturing companies, inventories do not change. The number of units produced equals the number ...

Do inventories change?

In manufacturing companies, inventories do not change. The number of units produced equals the number of units sold. While some of these assumptions may be violated in practice, the violations are usually not serious enough to call into question the basic validity of CVP analysis.