Explain the assumptions underlying CVP analysis.

Question

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Answer 1

Question

Chapter 3, Problem 1Q

To determine

Explain the assumptions underlying CVP analysis.

Expert Solution & Answer

Explanation of Solution

Cost-Volume-Profit Analysis (CVP Analysis):

CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.

Assumptions underlying the CVP analysis:

Change in costs and revenues will only take place due to the changes in sales level.
On a graph, cost and revenue represent a straight line which depicts the linear relationship between the two.
CVP analysis takes into consideration that cost can only be categorized into fixed and variable.
The fixed cost, selling price and variable cost per units are constant and known.

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Answer 2

Question

Chapter 3, Problem 1Q

To determine

Explain the assumptions underlying CVP analysis.

Expert Solution & Answer

Explanation of Solution

Cost-Volume-Profit Analysis (CVP Analysis):

CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.

Assumptions underlying the CVP analysis:

Change in costs and revenues will only take place due to the changes in sales level.
On a graph, cost and revenue represent a straight line which depicts the linear relationship between the two.
CVP analysis takes into consideration that cost can only be categorized into fixed and variable.
The fixed cost, selling price and variable cost per units are constant and known.

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Answer 3

Question

Chapter 3, Problem 1Q

To determine

Explain the assumptions underlying CVP analysis.

Expert Solution & Answer

Explanation of Solution

Cost-Volume-Profit Analysis (CVP Analysis):

CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.

Assumptions underlying the CVP analysis:

Change in costs and revenues will only take place due to the changes in sales level.
On a graph, cost and revenue represent a straight line which depicts the linear relationship between the two.
CVP analysis takes into consideration that cost can only be categorized into fixed and variable.
The fixed cost, selling price and variable cost per units are constant and known.

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Answer 4

Question

Chapter 3, Problem 1Q

To determine

Explain the assumptions underlying CVP analysis.

Expert Solution & Answer

Explanation of Solution

Cost-Volume-Profit Analysis (CVP Analysis):

CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.

Assumptions underlying the CVP analysis:

Change in costs and revenues will only take place due to the changes in sales level.
On a graph, cost and revenue represent a straight line which depicts the linear relationship between the two.
CVP analysis takes into consideration that cost can only be categorized into fixed and variable.
The fixed cost, selling price and variable cost per units are constant and known.

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Answer 5

Chapter 3, Problem 1Q

To determine

Explain the assumptions underlying CVP analysis.

Expert Solution & Answer

Explanation of Solution

Cost-Volume-Profit Analysis (CVP Analysis):

CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.

Assumptions underlying the CVP analysis:

Change in costs and revenues will only take place due to the changes in sales level.
On a graph, cost and revenue represent a straight line which depicts the linear relationship between the two.
CVP analysis takes into consideration that cost can only be categorized into fixed and variable.
The fixed cost, selling price and variable cost per units are constant and known.

Answer 6

Chapter 3, Problem 1Q

To determine

Explain the assumptions underlying CVP analysis.

Expert Solution & Answer

Explanation of Solution

Cost-Volume-Profit Analysis (CVP Analysis):

CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.

Assumptions underlying the CVP analysis:

Change in costs and revenues will only take place due to the changes in sales level.
On a graph, cost and revenue represent a straight line which depicts the linear relationship between the two.
CVP analysis takes into consideration that cost can only be categorized into fixed and variable.
The fixed cost, selling price and variable cost per units are constant and known.

Answer 7

Chapter 3, Problem 1Q

To determine

Explain the assumptions underlying CVP analysis.

Answer 8

Expert Solution & Answer

Explanation of Solution

Cost-Volume-Profit Analysis (CVP Analysis):

CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.

Assumptions underlying the CVP analysis:

Change in costs and revenues will only take place due to the changes in sales level.
On a graph, cost and revenue represent a straight line which depicts the linear relationship between the two.
CVP analysis takes into consideration that cost can only be categorized into fixed and variable.
The fixed cost, selling price and variable cost per units are constant and known.