These cost volume profit analysis assumptions are as follows:
1. Selling price is constant. The price of a product or service will not change as volume changes.
2. Costs are linear and can be
accurately divided into variable and fixed
elements. The variable element is constant per unit, and the fixed element
is
constant in total over the relevant range.
3. In multi-product companies, the sales mix is constant.
4. In manufacturing companies, inventories do not change. The number of
units produced equals the number of units
sold.