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Which one of the following is not an assumption of cost-volume-profit analysis?

a. Changes in activity and sales mix are the only factors that affect costs.
b. All costs can be classified as either variable or fixed.
c. The behavior of costs is linear throughout the relevant range.
d. All units produced are sold.

1 Answer

3 votes

Final answer:

The correct answer is 'Changes in activity and sales mix are the only factors that affect costs' as this is not an assumption of cost-volume-profit analysis.

Step-by-step explanation:

The student's question requires an understanding of Cost-Volume-Profit (CVP) analysis assumptions. The option that is not an assumption of CVP analysis is a. Changes in activity and sales mix are the only factors that affect costs. In CVP analysis, it is typically assumed that all costs can be classified as either variable or fixed (b), costs behave in a linear fashion throughout the relevant range (c), and that all units produced are sold (d). It is not assumed that changes in activity and sales mix are the only factors affecting costs, as there could be other factors such as changes in price levels, technological advances, or regulatory changes.

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