Which of the following statements regarding cost-volume-profit analysis is incorrect?
A) Cost-volume-profit analysis assumes that fixed cost per unit is constant.
B) Cost-volume-profit analysis assumes that the selling price cost per unit is constant.
C) An increase in inventory during a period will affect cost-volume-profit relationships.
D) Although cost-volume-profit analysis is based on assumptions that seldom will be perfectly achieved, the technique is still useful to managers.

Question

Quizplus · Accepted Answer

Cost-volume-profit analysis assumes that the fixed cost in total is constant, not per unit. Fixed cost per unit changes with the level of activity or volume of production.

Which of the Following Statements Regarding Cost-Volume-Profit Analysis Is Incorrect