Which of the following is a limitation of break-even analysis for a business?

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Question

Which of the following is a limitation of break-even analysis for a business?

Accepted Answer

It assumes all output produced is sold at a constant price — Break-even analysis assumes that all units produced are sold and that the selling price remains constant at all output levels, which may not reflect real market conditions where discounts are offered or unsold stock accumulates. Option A is incorrect because break-even charts can show profit or loss at any output. Option C is not a requirement of break-even analysis. Option D is incorrect as it is applicable to businesses of any size.

Answer

It can only be used by large businesses with multiple products

Answer

It cannot calculate profit at any output level

Answer

It requires knowledge of a business's market share

Answer

It assumes all output produced is sold at a constant price

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