You were talking to your roommate one day about CVP analysis and the approaches that are used to calculate the break-even point. You also described the assumptions that underlie this type of analysis....

Assumptions of Cost Profit Volume Analysis
Cost profit Volume analysis has certain inherent assumption associated with it which makes it
difficult to apply in practical scenarios and limit the scope of its use for theoretical studies. Basic
assumptions of Cost Profit Volume analysis are:
Fist assumption is that Cost Volume Profit Analysis assumes that all the cost involved in running
a business can either be classified as fixed or variable. This is not true in practical situations there
are certain costs which are partially fixed and partially increases with the level of production and
it may be difficult to determine the percentage of fixed and variable cost in the total cost. In such
cases cost volume profit analysis might not be able to predict exact breakeven point. Example of
such cost is cost incurred in paying electricity bill of a factory is partly fixed and rest depend on
the electricity consumed which increases with increase in number of units manufactured. Cost
Profit Volume Analysis does not accommodates such cost in its analysis. (Garrison, R. H.,
Noreen, E. W., & Brewer, P. C. 2003)
Justification of this assumption is that costs which are partly fixed and variable can be divided
into two...