What are the disadvantages of breakeven analysis

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Question: What are the disadvantages of breakeven analysis? First, the model assumes cost can be divided into fixed and variable categories and ignores the problems of arbitrarily making some allocations. Second, it assumes per-unit variable costs do not change at different levels of operation, ignoring the possibility of quantity discounts, more efficient use of the workforce, and other possible economies. Third, the basic breakeven model does not consider demand.

Reference no: EM131459960

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