A weakness of break-even analysis is that it assumes
A) revenue and costs are a linear (constant) function of volume.
B) sales prices and costs increase when the economy is strong and confidence is high.
C) the cost of goods sold goes up as revenue increases.
D) None of the options are true.

Question

Quizplus · Accepted Answer

The break-even analysis assumes that revenue and costs are a linear function of volume, which may not always be the case in real-world scenarios where changes in volume may not have a proportionate impact on revenue and costs. This assumption can lead to inaccurate predictions and flawed decision-making. Options B and C are not relevant to the weakness of break-even analysis. Therefore, the correct answer is A.

A Weakness of Break-Even Analysis Is That It Assumes