Accounting and Finance

Question 1

3 benefits of break even analysis

Answer 1

• easy to view
• can assess the consequences of change using margin of safety
• shows the level of profit at a given level of output

Question 2

3 disadvantages of break even analysis

Answer 2

• based on predicted figures
• a manufacturer might negotiate prices from buying in bulk, therefore the direct/variable costs may change
• calculating relies on one price, there may be discounts offered to customers