Assumptions of cvp, Cost Accounting

Assumptions of CVP

This chapter has given information on how to apply CVP for the business analysis. Most of this analysis is keyed to the model of how profitability is impacted by alteration in the business volume. Like most of the models, there are number of inherent assumptions. Violating the suppose has the potential to undermine the conclusions of the model. Some of these assumptions have been touched in the whole chapter:

1.   Costs can be segregated into the set and the variable portions

2.   The linearity of costs is preserved over the relevant range (such as variable cost is constant per unit, and fixed cost is constant in total.

3.   Revenues are stable per unit and multiple-product firms meet the expected product mix ratios

One extra assumption is that inventory levels are fairly constant, with the number of units produced equalling the number of units sold. If inventory levels vary, some of the variable and set product costs might flow into or out of inventory, with the variety of potential impacts on the profitability.



Posted Date: 7/21/2012 5:06:04 AM | Location : United States

Related Discussions:- Assumptions of cvp, Assignment Help, Ask Question on Assumptions of cvp, Get Answer, Expert's Help, Assumptions of cvp Discussions

Write discussion on Assumptions of cvp
Your posts are moderated
Related Questions
Example of Labour Remuneration Beneath a premium bonus scheme, workers obtained a guaranteed basic hourly minimum rate of pay in addition of a bonus of 50 percent of the time

what is labour

Suppose that $4 million is available for investment in three projects.  The probability distribution of the net present value earned from each project depends on how much is invest

Amazing acrobatics performs acrobatics in stadiums around the world. The average show sells about 1,000 tickets at $60 per ticket. Each show requires a team of 45 highly trained sp

Beginning inventory on March 1 consisted of 2,000  units each costing $11.20 . During March, the following was purchased for inventory: Date Purchase

Value one stock using the dividend discount model of stock valuation with two periods of constant growth (not the simple one period growth model).  See chapter 18 of the textbook

P1 Given the following data:   German Bond U.S. T- Bonds

Vintage Auto Company manufactures parts to order for antique cars. Vintage Auto makes everything from fenders to engine blocks. Each customer order is treated as a job. Vintage Aut

mojor elements of cost sheet

on the first day of the current fiscal year $2,000,000 of 10 year 7% bonds with interest payable annually, were sold for $2,125,000. Present enteries to record the following transa