CVP Analysis (2)

Question 1

Benefits of a breakeven analysis?

Answer 1

A useful technique for maangers as it can provide simple and quick estimates.

Therefore useful for assessing risk surronding the estimate of sales volume

Question 2

Limitation of a breakeven analysis (cosntant mix)?

Answer 2

If there are multiple products, they are sold in a constant mix

Question 3

Limitation of a breakeven analysis (All costs)?

Answer 3

All costs can be split into fixed and variable elements

Question 4

Limitation of a breakeven analysis (Fixed)?

Answer 4

Fixed costs are constant

Question 5

Limitation of a breakeven analysis (Variable)?

Answer 5

Variable cost per unit is constant

Question 6

Limitation of a breakeven analysis (Selling)?

Answer 6

Selling price is constant

Question 7

Limitation of a breakeven analysis (Inventory)?

Answer 7

Inventory levels are constant