A weakness of break-even analysis is that it assumes
A) revenue and costs are a linear (constant) function of volume.
B) prices and costs increase when the economy is strong and confidence is high.
C) cost of goods sold go up as revenue increase.
D) there is no weakness

Question

Quizplus · Accepted Answer

Break-even analysis assumes that revenue and costs are linear (constant) functions of volume, which is not always the case in real-world situations. In reality, prices and costs can be affected by various factors such as changes in the economy, consumer behavior, and competition, which can lead to non-linear relationships between revenue and costs. Therefore, the assumption of linearity in break-even analysis can be a weakness.

A Weakness of Break-Even Analysis Is That It Assumes