In CVP analysis, managers usually assume that the revenue function is linear. Which of the following equations best represents a linear revenue function if the cost is a variable cost?
A) y = $200 + $60x
B) y = $60x2
C) y = $60x
D) y = $200

Question

Quizplus · Accepted Answer

A linear revenue function indicates that the revenue increases proportionally with the increase in the number of units sold. The equation y = $60x represents a linear revenue function as it shows that the revenue ($y) is directly proportional to the number of units sold (x) at a constant price of $60 per unit. Options A and D show a constant revenue, while option B shows a quadratic function, which does not represent a linear relationship.

In CVP Analysis, Managers Usually Assume That the Revenue Function