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What are the limitations of Cost volume profit analysis?

In: Financial Statements [Edit categories]

Answer:

A number of limitations are commonly mentioned

with respect to CVP analysis:

1. The analysis assumes a linear revenue function

and a linear cost function.

2. The analysis assumes that what is produced is

sold.

3. The analysis assumes that fixed and variable

costs can be accurately identified.

4. For multiple-product analysis, the sales mix is

assumed to be known and constant.

5. The selling prices and costs are assumed o be

known with certainty.

First answer by ID1522635020. Last edit by ID1522635020. Question popularity: 2 [recommend question].

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Relevant answers:

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