CVP Analysis Assumptions

Steps:

• List standard CVP assumptions: constant selling price per unit, constant variable cost per unit, total fixed costs constant, production equals sales.
• Evaluate option A: matches constant selling price assumption.
• Evaluate option C: unit fixed cost varies inversely with volume, unlike total fixed costs.
• Conclude C is not an assumption.

Why C is correct:

• In CVP, total fixed costs remain constant regardless of volume, so unit fixed cost = total fixed costs / units produced, decreasing as volume rises (per the contribution margin formula: CM = Sales - Variable Costs).

Why the others are wrong:

• A: CVP assumes constant unit selling price for linearity in revenue.
• B: CVP assumes constant unit variable cost for predictable total variable costs.
• D: CVP assumes all units produced are sold to avoid inventory effects on costs and revenues.

Final answer: C