Cost-Volume-Profit Analysis Cost-Volume-Profit Analysis and Break Even Discussion Scenario Stacks of coinsRead the following scenario and then thoughtfully discuss the questions.
In a recent news report, the following statement was made: “A report put out by brokerage house CLSA about Jet Airways said that the fall in ATF (fuel) prices has brought down the load factors (flight occupancy) required for the airlines to break even from 78 percent to 63 percent.” The load factor is the percentage of available seats on a flight that are occupied.
•What are some important assumptions commonly made in CVP analysis?
•What significant assumptions and limitations should be considered when using this piece of information?
•Do these assumptions impose serious limitations on the analysis? Why or why not?