Which condition would result in invalidating an application of break-even analysis?
A) The variable cost to produce a unit is less than one percent of the fixed cost to run the plant.
B) The purchasing department both offers quantity discounts to customers and receives quantity discounts from suppliers.
C) The variable cost to produce a unit is within one percent of the sale price.
D) The labor to manufacture the item is free.

Question

Quizplus · Accepted Answer

Break-even analysis assumes that costs are fixed and variable costs are directly proportional to the volume of output. Quantity discounts from suppliers and offered to customers introduce a non-linearity in costs and revenues, respectively, which violates the assumptions of break-even analysis, making it less accurate or invalid.

Which Condition Would Result in Invalidating an Application of Break-Even