Question

Which of the following assumptions is false in a cost-volume-profit analysis? Total sales and total costs can be represented by straight lines. Within the relevant range of operating activity, the efficiency of operations does not change. Costs can be divided into fixed and variable components. There are changes in the inventory quantities during the period.

Answer 1

Answer:

Correct answer: " There are changes in the inventory quantities during the period".

Explanation:

Cost- Volume profit analysis refers to a method, which focuses on determining the impact of the various levels of cost and the volume on the operating profit of the business.

It is also known as break-even analysis which is used by the managers to make short-term decisions. It includes various assumptions, which may include the fixed costs, variable costs, sales price per unit that are constant.

Answer 2

The cost-volume-profit analysis is a way to find out the way the changes and variables are foxed in the costs which affect the firms and help in making the profit.

• The cost volume shows how many units are needed to be sold to reach the break-even point.

• It also shows the mini-plot margins. There are changes to the inventory and quantities during the period.

Hence e the option D is correct.

Learn more about the following assumptions is false in a cost-volume-profit.

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