The CVP graph uses the assumption that expenses are linear over the relevant range.

Question

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The CVP (Cost-Volume-Profit) graph assumes that expenses are linear over the relevant range, meaning that total expenses increase proportionally with the level of activity or production. This assumption allows managers to easily predict the impact of changes in sales volume or prices on a company's profitability. However, it should be noted that in reality, expenses may not always be perfectly linear and can sometimes incur step changes or non-linear costs at certain production levels.

The CVP Graph Uses the Assumption That Expenses Are Linear