Final answer:
CVP analysis assumes that inventory levels do not change is the incorrect assumption among the options provided. CVP analysis presumes a constant sales mix, linear costs within the relevant range, and the ability to break down mixed costs.
Step-by-step explanation:
The student's question relates to the assumptions of cost-volume-profit (CVP) analysis. CVP analysis relies on several key assumptions to provide accurate and relevant insights. Among the multiple-choice options, the assumption that 'inventory levels do not change' is not typically associated with CVP analysis. Instead, CVP assumes that sales mix is constant, mixed costs are separable into fixed and variable components, and that costs must be linear within the relevant range, meaning that variable costs are constant per unit, and total fixed costs are constant in total.
Breaking down total costs into fixed cost, marginal cost, average total cost, and average variable cost offers insights for the firm. However, these insights must be combined with sales, revenue analysis, and market structure to make final decisions on the profit-maximizing output and pricing strategy.