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

Question

Quizplus · Accepted Answer

All of the given options are considered limitations of breakeven analysis. It assumes that the firm's sales revenue and total operating cost functions are linear, which may not hold true in reality. It is also challenging to separate semivariable costs into fixed and variable components accurately. Additionally, breakeven analysis has a short-term time horizon as it assumes that there are no changes in the market and the cost structure.

Which One of the Following Is Considered a Limitation of Breakeven