ECONOMICS

Detailed explanation-1: -Ignores competition – Another limitation of a break-even analysis concerns the fact that competitors aren’t factored into the equation. New entrants to the market could affect demand for your products or cause you to change your prices, which is likely to affect your break-even point.

Detailed explanation-2: -Limitations of breakeven analysis Variable costs do not always stay the same. For example, as output rises, the business may benefit from being able to buy inputs at lower prices (buying power), which would reduce variable cost per unit.

Detailed explanation-3: -However, break-even analysis does have some drawbacks: break-even assumes a business will sell all of the stock (of a particular product) at the same price. businesses can be unrealistic in their calculations. variable costs could change regularly, meaning the analysis could be inaccurate.

Detailed explanation-4: -While measuring break-even analysis, it is considered that during a specific period there will be no change in general price level, i.e., labor, cost of material and other overheads. 5. Which of the following are limitations of break-even analysis? b) Capital employed is taken into account.