Which of the following is not an assumption made when performing cost-volume-profit analysis?
A) Number of units produced is greater than the number of units sold.
B) Worker efficiency is held constant.
C) The company produces within the relevant range of activity.
D) There is a linear relationship between cost and volume for both fixed and variable cost.

Question

Quizplus · Accepted Answer

The assumption that the number of units produced is greater than the number of units sold is not made in cost-volume-profit analysis. Instead, the assumption is that the number of units sold is equal to the number of units produced. This is because the analysis is focused on the relationship between sales revenue, cost, and profit based on the number of units sold. The other assumptions listed (worker efficiency held constant, production within the relevant range, linear relationship between cost and volume) are all typically made in cost-volume-profit analysis.

Which of the Following Is Not an Assumption Made When