FOR ESSAYS GURU ONLY 44B

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Some important assumptions commonly made in CVP analysis are that price per unit doesn’t change as volume changes, managers can classify each cost as variable, fixed, or mixed,  the only factor that affects total costs is a change in volume, total fixed costs do not change and that there are no changes in inventory levels.  Significant assumptions and limitations that should be considered when using this information are that other costs have not risen, flight prices will remain the same, and every flight will at least break even (meet minimum required flight occupancy).  These assumptions can impose serious limitations on the analysis, especially if other costs have increased because then the analysis would be completely incorrect