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Homework answers / question archive / Marty Moser wants Moser Company to use CVP analysis to study the effects of changes in costs and volume on the company
Marty Moser wants Moser Company to use CVP analysis to study the effects of changes in costs and volume on the company. Marty has heard that certain assumptions must be valid in order for CVP analysis to be useful. Instructions.
Prepare a memo to Marty Moser concerning the assumptions that underlie CVP analysis.
Answer:
The components of CVP analysis
selling price per unit
Variable cost per unit
Total fixed costs
Manpower Cost Direct and indirect
Level or volume of activity.
The important assumptions of CVP analysis are:
Selling price, variable cost per unit, remain constant
and total fixed costs remain constant through the relevant level or range.
This means that a company can sell more or fewer units at the same price and that the company has no change in technical efficiency as volume changes..
Costs can be correctly classified into their fixed and variable portions.
And sometimes up to one range some expenses are fixed and variable after reaching the level those expenses turned as semi variable and semi fixed cost
Example :Electricity Charges will change after reaching the some level of units
These are main Assumptions of CVP analysis
If u need more information please comment and satisfy give comment.