Which of the following is a limitation of break-even analysis?
A) It cannot be used to estimate the profit a business is likely to make
B) It cannot factor in seasonal pricing and price discounts
C) It cannot show how much a business needs to sell to cover its costs
D) It cannot show the level of profit or loss at a range of outputs
Your answer - OCR - GCSE Business - Question 7 - 2019 - Paper 1
Question 7
Which of the following is a limitation of break-even analysis?
A) It cannot be used to estimate the profit a business is likely to make
B) It cannot factor in seas... show full transcript
Worked Solution & Example Answer:Which of the following is a limitation of break-even analysis?
A) It cannot be used to estimate the profit a business is likely to make
B) It cannot factor in seasonal pricing and price discounts
C) It cannot show how much a business needs to sell to cover its costs
D) It cannot show the level of profit or loss at a range of outputs
Your answer - OCR - GCSE Business - Question 7 - 2019 - Paper 1
Step 1
A) It cannot be used to estimate the profit a business is likely to make
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Answer
This statement is not accurate because break-even analysis primarily focuses on covering costs, but it does not estimate profits directly.
Step 2
B) It cannot factor in seasonal pricing and price discounts
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Answer
This statement accurately reflects a limitation of break-even analysis, as it typically assumes constant prices and does not account for fluctuations due to seasonal changes or discounts.
Step 3
C) It cannot show how much a business needs to sell to cover its costs
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Answer
This is incorrect because break-even analysis specifically calculates the volume of sales necessary to cover costs.
Step 4
D) It cannot show the level of profit or loss at a range of outputs
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Answer
While break-even analysis does help determine the break-even point, it can indeed show profit and loss at different output levels, so this statement is also a misrepresentation.
