CIMA BA2 · Chapter 10 · Question 9 of 12
Which of the following is NOT an assumption of basic cost-volume-profit analysis?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Selling price per unit falls as more units are sold
Explanation
Basic CVP analysis assumes linear revenue and cost functions within the relevant range: a constant selling price, constant variable cost per unit, constant total fixed costs and a constant sales mix. A falling price as volume rises would make the revenue line curved, which contradicts the basic model.
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