Cost volume profit (CVP) analysis is based on a number of limiting assumptions. Which of the following is not one of the assumptions of the CVP model?

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Quizplus · Accepted Answer

The assumption that CVP analysis only applies to a single-product firm is not accurate. CVP analysis can be applied to a multi-product firm by treating the products as separate profit centers with their own unit sales, unit costs, and contribution margins. The other three assumptions listed (production units equal sales units, constant product mix, linear cost behavior) are all key assumptions of the CVP model.

Cost Volume Profit (CVP) Analysis Is Based on a Number