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SSC Financial and Cost Accounting P-1 QUESTION #6127
Question 1

What are the major assumptions in CVP analysis?

  1. Costs can be identified as either variable or fixed.
  2. The fixed cost per unit is constant as activity rises.
  3. The variable cost per unit fluctuates with volume.
  4. Volume of activity is the only factor affecting revenue and variable costs.
  • 1 and 2
  • 1 and 4✔️
  • 2 and 3
  • 2 and 4
Correct Answer Explanation

Option B (1 and 4) is correct.

  • Statement 1 (True): All costs can be split into fixed/variable.
  • Statement 2 (False): Fixed cost per unit decreases as output rises (total is constant).
  • Statement 3 (False): Variable cost per unit is assumed constant.
  • Statement 4 (True): Only volume affects costs and revenue.