20.6 LIMITATIONS OF BREAK-EVEN ANALYSIS
Despite the usefulness of the break-even analysis in the decision-making process, there are certain limitations to its usefulness. The results shown are often not completely accurate under all conditions, insofar as there are a number of factors which could influence them appreciably. For example, an increase in selling price may cause a reduction in the sales volume which is generally not taken into account in this analysis. Again, if the firm sells more than one product, the break-even chart of the firm as a whole, showing cost and revenue, does not truly represent these variables for any one product. Yet again, this analysis does not take into consideration the capital employed which may be a very important ...
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