Complete (beware of singular or plural of word) the assumptions underlying the CVP analysis outlined below:

1. Changes in the level of Answer and costs arise only because of changes in the number of Answer (or service) units sold.

2. Total costs can be separated into a Answer component that does not vary with the units sold and a component that is Answer with respect to the units sold.

3. When represented graphically, the behaviour of total revenues and total costs are Answer (represented as a straight line) in relation to units sold within a Answer range and time period.

4. The selling price, variable cost per unit and fixed costs are known and Answer.

Answer analysis is a ‘what-if’ technique that managers use to examine how a result will change if the original predicted data are not achieved or if an underlying assumption changes

Operating Answer describes the effects that fixed costs have on changes in profit as changes occur in units sold, and hence, in contribution margin.

Managers should be concerned about the Answer (in one word) point because it helps determine when a business venture will be profitable. Break-even point shows a company how far sales can decline before a net Answer will be incurred. It helps to assess the risk of Answer.

An automated production line would increase Answer costs through extra depreciation on the new machinery and also decrease Answer costs due to the elimination of direct labour as a result of automation. This would Answer increase decrease the break-even point. This could possibly have a Answer positive negative effect on the firm if demand for the product produced by this production line is expected to decline in the future. With high fixed costs and low demand, a decline in profits might be more severe due to the presence of unchanging fixed costs as volume drops.

Answer rating: 100% (QA)

Answer 1Changes in the level of revenues and costs aris... View the full answer