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breakeven analysis assumes that all costs are fixed or variable. In reality, this is an inaccurate...

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Accounting

breakeven analysis assumes that all costs are fixed or variable.In reality, this is an inaccurate assumption. Some costs aresemi-variable and mixed. In the book discusses 3 different ways toseparate mixed and variable costs into fixed and variable parts,but these are estimates as well. Considering the inaccuracies andestimates in the assumptions, what is the point of doing break evenanalysis at all?

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There are certain costs which are fixed till sertain point and than convert to variable once it crosses some point Such costs are called semivariable cost For example Electricity cost can be fixed till certain points and become variable once it crosses that point Following are the methods to convert such cost into fixed and variable 1 Scattergraph 2 Highlow method 3 Regression Analysis 1 Scattergraph Scattergraph means plotting of points on the graph The benefit of the scattergraph is that it allows you to see if some of the plotted points are simply out of line Lets assume that a company uses only one    See Answer
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Transcribed Image Text

breakeven analysis assumes that all costs are fixed or variable.In reality, this is an inaccurate assumption. Some costs aresemi-variable and mixed. In the book discusses 3 different ways toseparate mixed and variable costs into fixed and variable parts,but these are estimates as well. Considering the inaccuracies andestimates in the assumptions, what is the point of doing break evenanalysis at all?

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