C is corrent. There are a number of underlying assumptions to breakeven analysis that need to be considered in the calculation and interpretation of breakeven computations. One of these assumptions is that the behavior of total cost and total revenue is linear, even though in actuality it may not be. It is important to note that under breakeven analysis, the linearity assumption is only applicable for a particular relevant range of activity and is not assumed for all levels of activity. Since the actual behavior of total cost and total revenue within a relevant range is usually close to being linear, this assumption will only slightly affect the precision and reliability in a given breakeven calculation.
A is incorrect because breakeven analysis does not assume that selling prices are nonlinear over the relevant range.
B is incorrect because breakeven analysis does not assume that variable costs are nonlinear over the relevant range.
D is incorrect because breakeven analysis does not assume that fixed costs are nonlinear over the relevant range.
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