Which of the following is an assumption of a cost-volume-profit analysis?
A)Selling price and costs cannot be accurately identified.
B)Selling price and costs vary within the relevant range.
C)Inventory levels can increase or decrease.
D)Selling price and costs behave in a linear manner.

Question

Quizplus · Accepted Answer

In cost-volume-profit analysis, it is assumed that selling price and costs behave in a linear manner. This means that changes in sales volume will have a proportional relationship with changes in costs and revenues. This assumption allows for the calculation of breakeven points and contribution margins, which are important metrics in decision making. Options A, B, and C are not assumptions of cost-volume-profit analysis.

Which of the Following Is an Assumption of a Cost-Volume-Profit