What Assumption Does Breakeven Analysis Make That Limits Its Overall

question 57

Multiple Choice

What assumption does breakeven analysis make that limits its overall usefulness?

• A) It focuses on how to achieve a price objective.
• B) It assumes a company wants to gain a certain market share.
• C) It relies on demand for a product being inelastic.
• D) It focuses only on competitive factors and not costs.
• E) It assumes demand is elastic for the product.

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Definitions:

Departmental Income Statements

Financial statements that show the operating results of each department within a company, highlighting revenues and expenses.

Profit Center

A branch or division of a business that is responsible for generating its own revenue and profit.

Cost Center

A department within an organization that does not directly add to profit but still incurs costs.

Indirect Expenses

Expenses that cannot be traced directly to one department.