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
i asking for start up


behabioural aspect of standard costing on budget

Approach in Cost Accounting Cost accounting is based on the framework or concept of cost centers that is all the costs incurred throughout the production process contain to be

Marvin's Motors Company (MMC) manufactures outboard motors for use on small to medium sized boats. MMC produces three models: the Standard, the Deluxe and the Performance. The comp

GZ Inc. manufactures two products that require both machine processing and labor operations. Although there is unlimited demand for both products, GZ could devote all its capacitie

The follow data relates ot year 20XX for Plano Manufacturing Company: Units produced - 2,000 Units sold - 1,800 Selling price - $200 / per unit Direct material costs - $80,000 Dire

is ppe taxable

In early July, Mike Gottfried purchased a $70 ticket to the December 15 game of the Chicago Titans. (The Titans belong to the Midwest Football League and play their games outdoors

Absorption Costing The process described in this section by that net overheads are absorbed into production naturally enough is identified as absorption costing.  The absorpti