Which statement best describes CVP assumptions about selling price?

Which statement best describes CVP assumptions about selling price?

• A. Selling price remains constant
• B. Selling price increases with volume
• C. Selling price decreases with volume
• D. Selling price is unpredictable

Answer: (A)

In CVP analysis, revenue is modeled as selling price per unit times quantity, with the price assumed to stay the same as volume changes. This keeps the contribution margin per unit constant and makes total revenue a linear function of volume, which underpins the break-even and target-profit calculations. Therefore, the statement that selling price remains constant is the best description of CVP assumptions about price. If the price varied with volume (increasing, decreasing, or unpredictably), the simple CVP model would no longer apply without modification to account for those price changes.

In CVP analysis, revenue is modeled as selling price per unit times quantity, with the price assumed to stay the same as volume changes. This keeps the contribution margin per unit constant and makes total revenue a linear function of volume, which underpins the break-even and target-profit calculations. Therefore, the statement that selling price remains constant is the best description of CVP assumptions about price. If the price varied with volume (increasing, decreasing, or unpredictably), the simple CVP model would no longer apply without modification to account for those price changes.