CEVAP:

The CVP analysis is based upon the following assumptions:

1. The sales price per unit is constant,

2. Variable costs per unit and fixed costs are constant,

3. The firm sells all units produced,

4. The cost structure is constant meaning that costs change only by the level of activity,

5. If there is more than one product produced and sold, the sales mix of these products is constant.

6. Costs and revenues remain constant within a specified production level, which is usually called as the relevant range.