Unrealistic single product companies are used in textbook examples to avoid the difficulties of assigning specific amounts of fixed overhead costs to specific products. However, many multi-product companies will tend to sell their products in fairly constant proportions, and a company's products will often have a fairly standard ratio of contribution to selling price. If these factors apply, then it is possible to use cost-volume-profit analysis in more realistic settings.

3. Linearity - Total costs and total revenue are linear functions of output. Economists would suggest that total costs are non-linear - experiencing increasing returns to scale at lower volumes and decreasing returns to scale at high volumes. Similarly, total revenues will be affected by the need to reduce selling prices to sell larger volumes of output.

In practice, in the short-term large changes in production volume that might alter the cost structure of a company are rare, and similarly, selling prices will usually remain fixed (subject to minor bulk discounts) in the short-term. In normal circumstances the linearity assumption is a reasonable approximation.

4. Applies to the relevant range - even though the graph may show a range of output from zero to well above normal capacity cost-volume-profit analysis is only meant to apply to the 'relevant range' reflecting the normal short-term range of production volumes experienced. At extremely high or extremely low production levels the linear cost structure is likely to be distorted.