A weakness of breakeven 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 goes up as revenue increases.
D) there is no weakness.

Question

Quizplus · Accepted Answer

Breakeven analysis assumes that revenue and costs are a linear function of volume, which may not always be the case in reality. Prices and costs may fluctuate due to various external factors such as market competition, changes in consumer behavior, and economic conditions. Additionally, cost of goods sold may not necessarily increase as revenue increases, especially if economies of scale are achieved. This assumption can lead to inaccurate projections and decision-making.

A Weakness of Breakeven Analysis Is That It Assumes