ICANManagement InformationCost-Volume-Profit Analysis2025

Which of the following statements about Cost-Volume-Profit (CVP) analysis is CORRECT?

ACVP analysis assumes that fixed costs vary proportionately with output within the relevant range.
BCVP analysis assumes that selling price per unit remains constant regardless of the volume sold.CORRECT
CCVP analysis is only applicable to multi-product firms.
DCVP analysis requires that variable costs per unit increase as production volume rises.
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Why the answer is B, and why the others tempt you.
A fundamental assumption of CVP analysis is that selling price per unit is constant throughout the relevant range of activity. Fixed costs are assumed to remain constant in total, not vary with output. CVP analysis is equally applicable to single-product and multi-product firms. Variable costs per unit are assumed to remain constant, not increase.
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