The break-even and CVP models are based on sev¬ eral assumptions that limit their ability to reflect re¬ ality. Underlying assumptions are that

• revenue and variable cost per unit are constant and linear within the relevant range.

• contribution margin is linear within the relevant range.

• total fixed cost is constant within the relevant range.

• mixed costs can be accurately separated into their variable and fixed components.

• sales and production levels are equal. • labor productivity, production technology, and market conditions will not change during the pe-
• sales mix is constant in a multiproduct setting. riod under consideration. LO.1