COST ACCOUNTING
BREAK EVEN POINT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Which of the following is a limitation of break-even?
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It helps projected sales
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It is based on multiple products
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It assumes all units produced are sold.
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It considers stock wages
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Explanation:
Detailed explanation-1: -Some Limitations of Break-even analysis Assuming that the selling price remains constant results in a straight revenue line, which may or may not be accurate. The selling price of a product is determined by a variety of factors such as market demand and supply, competition, and so on, and it seldom remains constant.
Detailed explanation-2: -The break-even analysis is based on the following set of assumptions: (i) The total costs may be classified into fixed and variable costs. It ignores semi-variable cost. (ii) The cost and revenue functions remain linear.
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