Assumption of break even analysis
The break even analysis is based upon the following assumptions :
1) All elements of cost, i.e., production , administration and selling distribution can be segregated into fixed and variable components.
2) Variable cost remains constant per unit of output irrespective of the level of output and thus fluctuates directly in proportion to change in the volume of output.
3) Fixed cost remains constant at all volume of output.
4) Selling price per unit remains unchanged or constant at all levels of output.
5) Volume of production id the only factor that influences cost.
6) There will be no change in the general price level.
7) There is only one product or in case of multi-products the sales mix remains unchanged.
8) There is synchronization between production and sales.