Which one of the following is (are) considered as a limitation of break-even analysis?
A) It assumes that the firm faces linear or nonvarying sales revenue and total operating cost functions.
B) It has a short-term time horizon.
C) It is difficult to break semivariable costs into fixed and variable components.
D) All of the above.

Question

Quizplus · Accepted Answer

A) Break-even analysis assumes that the firm faces linear or nonvarying sales revenue and total operating cost functions. This might create inaccuracies in the long run.

B) Break-even analysis has a short-term time horizon, which means that it only considers the short-term effects of changes in the output quantity. As a result, it might not be appropriate for long term planning.

C) It is difficult to break semivariable costs into fixed and variable components, which might create difficulties in determining the break-even point accurately.

Therefore, all of the above choices are considered as a limitation of break-even analysis.

Which One of the Following Is (Are) Considered as a Limitation