Question

Which of the following are the assumptions of locational cost-profit-volume analysis : (I) nonlinear variable costs. (II) fixed costs that are constant over the range of possible output. (III accurate estimates regarding the required level of output. (IV) multiple products.

Answer 1

Full question:

Locational cost-profit-volume analysis assumes:

(I) nonlinear variable costs.

(II) fixed costs that are constant over the range of possible output.

(III accurate estimates regarding the required level of output.

(IV) multiple products.

A. I, III, and IV only

B. II and III only

C. I, II, and III only

D. II, III, and IV only

E. I, II, III, and IV

Answer:

II and III only  are the assumptions of locational cost-profit-volume analysis.

Explanation:

A process of defining the number of production where a company splits still with costs and profits is the locational cost-profit-volume analysis. This system needs into account both variable and fixed determinants that impact the overall creation values.

CPV practices a linear formula that acknowledges total costs similar to fixed costs plus variable costs.  In CPV commentary, one of the numerous significant defining features of variable costs is that they vary based on variations in the amount of production.