Describe the assumptions underlying CVP analysis ?
1. Changes in the level of revenues and costs arise only because of changes in the number of product (or service) units sold.
2. Total costs can be separated into a fixed component that does not vary with the units sold and a variable component that changes with respect to the units sold.
3. When represented graphically, the behaviors of total revenues and total costs are linear (represented as a straight line) in relation to units sold within a relevant range and time period.
4. The selling price, variable cost per unit, and fixed costs are known and constant.