Page 71 - P1 Integrated Workbook STUDENT 2018

Break-even analysis

Limitations of break-even analysis

3.1 Assumptions used in break-even analysis

 Linearity of total cost and total revenue.

 Constant price.

 Constant variable cost per unit.

 Constant contribution.

 Constant fixed costs.

 All costs can be divided into fixed and variable elements.

 Efficiency and productivity are unchanged.

 The sales mix is maintained as total volume changes.

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