What assumption does breakeven analysis make that limits its overall usefulness?
A) It focuses on how to achieve a price objective.
B) It assumes a company wants to gain a certain market share.
C) It relies on demand for a product being inelastic.
D) It focuses only on competitive factors and not costs.
E) It assumes demand is elastic for the product.

Question

Quizplus · Accepted Answer

Breakeven analysis assumes that demand for a product is inelastic, meaning that changes in price do not significantly affect the quantity demanded. However, in reality, demand for a product may be elastic, where a slight change in price can lead to a significant change in the quantity demanded. Therefore, the assumption of inelastic demand limits the overall usefulness of breakeven analysis in some situations.

What Assumption Does Breakeven Analysis Make That Limits Its Overall