Which of the following is correct with regard to break-even analysis?
A) Variable costs are really all that is important.
B) Fixed costs are all that really is important.
C) Some costs are unaffected by the number of units of product that are sold.
D) Generally speaking, retailers should charge higher prices so that they will reach the break-even point earlier.
E) Break-even analysis fails to take into account the slope of the demand curve.

Question

Quizplus · Accepted Answer

This statement is true as there are some costs such as rent, salaries, insurance, etc. that do not vary with the number of units sold and are fixed costs. These costs are considered in break-even analysis along with variable costs in order to determine the minimum sales volume required to cover all costs and achieve a zero profit/loss scenario.

Answer: E 
 This statement is false as break-even analysis does take into account the demand curve by determining the point at which total revenue equals total costs. However, it does not consider the slope of the demand curve, which may affect pricing strategies and sales volume.

Therefore, the correct answer is C only.

Which of the Following Is Correct with Regard to Break-Even