CVP Analysis (2) Flashcards
Benefits of a breakeven analysis?
A useful technique for maangers as it can provide simple and quick estimates.
Therefore useful for assessing risk surronding the estimate of sales volume
Limitation of a breakeven analysis (cosntant mix)?
If there are multiple products, they are sold in a constant mix
Limitation of a breakeven analysis (All costs)?
All costs can be split into fixed and variable elements
Limitation of a breakeven analysis (Fixed)?
Fixed costs are constant
Limitation of a breakeven analysis (Variable)?
Variable cost per unit is constant
Limitation of a breakeven analysis (Selling)?
Selling price is constant
Limitation of a breakeven analysis (Inventory)?
Inventory levels are constant