Which of the following situations would most likely violate cost-volume-profit a

Question

Which of the following situations would most likely violate cost-volume-profit assumptions about fixed costs? a. When production volume increases beyond the capacity of the plant, a second shift will be added instead of building a new plant. b. As volume decreases, per unit fixed manufacturing overhead remains constant. c. The company's raw material supplier typically allows volume discounts when larger amounts of the raw material are purchased. d. Fixed costs per unit decrease as volume increases . i chose c as the answer that would not be part of the cvp assupmtion

Explanation / Answer

As per the CVP assumptions the fixed cost will remain the same. But if the company runs a second shift then the costs will increase. example there will be more depreciation on machine, the administrative staff will have to work more etc. options b and d are expected behavoirs of CVP analysis and c is not relevant to discussion.

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