assumptions underlying cost-volume-profit (CVP) analysis Definition | Business Dictionaries from AllBusiness.com

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Business Definition for: assumptions underlying cost-volume-profit (CVP) analysis

assumptions underlying cost-volume-profit (CVP) analysis

assumptions that limit the usefulness of the basic and Cost-Volume-Profit (CVP) Analysis models. They are: (1) The behavior of both sales revenue and expenses is linear throughout the entire relevant range of activity; (2) There is only one product or service or a constant sales mix ; (3) Inventories do not change significantly from period to period; (4) Volume is the only factor affecting sales and expenses.

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