One of the Limitations Associated with Break-Even Analysis Is That

question 83

Multiple Choice

One of the limitations associated with break-even analysis is that

• A) it assumes fixed costs are zero.
• B) it cannot adjust for high variable costs.
• C) it only tells marketers what price is needed to break even.
• D) it assumes that there is only one price.
• E) it assumes that demand is extremely inelastic.

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Definitions:

Labor Efficiency Variance

A measure of the difference between the actual hours worked by employees and the standard hours expected to complete a task, used to assess labor productivity.

Direct Labor Standards

These standards define the amount of time and the rate of pay anticipated for direct labor required to manufacture a product or provide a service.

Actual Direct Labor Cost

Actual direct labor cost is the total amount of money paid for the wages of laborers directly involved in the production of goods or services.

Labor Efficiency Variance

The difference between the actual hours worked and the standard hours allowed, multiplied by the standard labor rate, indicating efficiency in labor usage.