An important assumption of cost-volume-profit analysis is that a. both costs and revenues are linear functions. b. all cost and revenue relationships are analyzed within the relevant range. c. there is no change in inventories. d. the sales mix remains constant. e. all of these are assumptions of cost-volume-profit analysis

The correct answer is : E. All of these are assumptions of cost-volume-profit analysis

Explanation:

It is used to determine the effect of changes in costs and volume in a company's operating income and net income. This method evaluates the impact that varying levels of costs and volume have on operating profit. It is very useful because it helps the companies director's boards to make short-term economic decisions.

E. All of these are assumptions of cost-volume-profit analysis

Explanation:

The assumptions underlying cost-volume-profit analysis also known as CVP are analysis that help business owner, organisation or company on how to effectively and accurately plan. It also help them when making decision.

In cost volume profit analysis both costs and revenues are linear functions throughout the most important or relevant range of activity and there is no change in inventories and the sales mix because they are constant or fixed meaning they don't change although costs can be classified accurately as either fixed or variable despite the assumption that sales price, fixed costs, and variable cost per unit are constant because any changes in costs and volume may affect a company's operating income as well as their net income.

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.