Question: Why might the operating profit calculated by CVP analysis differ from the net income reported in financial statements for external reporting? Why does the accountant

  1. Why might the operating profit calculated by CVP analysis differ from the net income reported in financial statements for external reporting?
  2. Why does the accountant use a linear representation of cost and revenue behavior in CVP analysis? How is this justified?
  3. The typical cost-volume-profit graph assumes that profits increase continually as volume increases. What are some of the factors that might prevent the increasing profits that are indicated when linear CVP analysis is employed?

Please, answer each question in details, around three hundred words for each.

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