Which of the following do limitations of cost volume profit include?
i. Not all costs can be classified as fixed or variable.
ii. Revenue changes may not be linear.
iii. Sales volume is the only cost driver.
iv. Inventory levels do not change.

Question

Quizplus · Accepted Answer

Cost Volume Profit (CVP) analysis has several limitations, including the difficulty in classifying all costs strictly as fixed or variable (i), the assumption that revenue changes linearly with sales volume which may not always be the case (ii), the oversimplification that sales volume is the only cost driver ignoring other factors (iii), and the assumption that inventory levels remain constant which may not reflect real business operations (iv).

Which of the Following Do Limitations of Cost Volume Profit