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What are the assumptions for Cost-Volume-Profit Analysis (Break Even Point Analysis)

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Question added by Ahmed Abd Alwahab Awad Ibrahim , Chief Accounting , ICCDP
Date Posted: 2014/09/29
Deleted user
by Deleted user

very good mr ahmed abd alwahab

I agreed with u

  1. All cost can be categorized as variable or fixed.
  2. Sales price per unit, variable cost per unit and total fixed cost are constant.
  3. All units produced are sold.

Ahmed Abd Alwahab Awad Ibrahim
by Ahmed Abd Alwahab Awad Ibrahim , Chief Accounting , ICCDP

1-    Sales Price per unit is constant on the level of unit under relevant range

 

2-    Variable Cost per unit is constant on the level of unit under relevant range

 

3-    No production Inventory That mean production Volume equal Sales Volume

 

4-    One product In case of multiple product companies, the selling prices, costs and proportion of units (sales mix) sold will not change

 

5-    Fixed costs remain constant within the relevant range. Fixed costs remain unchanged at any level of activity within the relevant range.

 

6-    The behavior of total revenues and total costs will be linear over the relevant range.

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