Identify a Disadvantage of Break-Even Analysis

question 240

Multiple Choice

Identify a disadvantage of break-even analysis.

• A) It cannot be used to determine the break-even point in dollars.
• B) It is not helpful for evaluating what might happen to profits in different market environments.
• C) It does not consider the effect of price on the quantity that consumers will want.
• D) It is not helpful for evaluating alternatives.
• E) It is an extremely complicated method.

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Definitions:

Cost Line

A graph representation showing the relationship between the cost incurred by a company and the level of activity or volume of production.

Activity-based Costing

A costing method that assigns overhead and indirect costs to specific activities, providing a more accurate representation of product costs.

Direct Materials

Raw materials that are directly consumed in the manufacturing process of a product and are easily identifiable in the final product.

Unit Cost

The cost incurred to produce, store, and sell one unit of a product, calculated by dividing total costs by the number of units.