Break- even charts are useful at times. What are some of their weaknesses?

Question

Quizplus · Accepted Answer

The Answer is Useful as they are, break- even charts can be only a rough approximation of profit. This is, in part, because assumptions must be made regarding allocation of costs. Cost allocations are good only over short ranges of sales volume. When they are extrapolated beyond that range, the analysis is less exact. In addition, this analysis works best when there is only one product. In a restaurant where there are many items on the menu, mark- ups will vary and an average will have to be used. This limits the accuracy of the analysis.

Break- Even Charts Are Useful at Times