State five limitations of break-even analysis

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XYZ Company manufactures a product called "PERMA". Pertinent cost and revenue data relating to the manufacture of this product is given below:

Selling price per unit 66
Variable production cost per unit 44
Variable selling cost per unit 4

Fixed production cost (total) Shs.200,000
Fixed selling and administrative cost (total) Shs.99,000

Required

Question a) Calculate the break-even sales level in shillings;

Question b) Suppose the company desires to make a profit of shs.195,000, what should be the output in units?

Question c) A new machine, which is more efficient, is installed. This machine increases the fixed production cost by 20% but reduces the variable production cost per unit by 30%. What is the new break-even point in sales revenue?

Question d) State five limitations of break-even analysis.

Reference no: EM132560627

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