a. Five major assumptions underlying CVP analysis:

• Costs are linear: Variable costs per unit and fixed costs remain constant within the relevant range.
• Sales prices are constant: Unit selling price does not change with volume.
• Single product or constant mix: Assumes one product or fixed sales mix for multi-products.
• All costs are classifiable: Clearly separated into fixed and variable, ignoring semi-variable.
• Volume is the only driver: Profit changes solely due to sales volume, not other factors like efficiency.

In Ghanaian banking, CVP helps in fee-based services, but assumptions limit its use in volatile environments like post-DDEP interest rate fluctuations.

b. Contribution per unit = Selling price – Variable cost = 20 – 12 = 8.
Fixed costs = 450,000.

i. Contribution/sales ratio = (Contribution per unit / Selling price per unit) × 100 = (8 / 20) × 100 = 40%.

ii. Break-even volume = Fixed costs / Contribution per unit = 450,000 / 8 = 56,250 units.
Explanation: At break-even, total contribution equals fixed costs; divide fixed costs by unit contribution to find units needed.

iii. Value of sales required to break-even = Break-even units × Selling price = 56,250 × 20 = 1,125,000.
Alternative: Fixed costs / C/S ratio = 450,000 / 0.4 = 1,125,000. Explanation: Multiplies break-even volume by price or divides fixed costs by the ratio for sales value.