ACCA Performance Management (F5) Certification Practice Exam

Which of the following is NOT a component of break-even analysis?

1. Sales price

2. Fixed costs

3. Integration of demand forecasting

4. Variable costs

The correct answer is: Integration of demand forecasting

Break-even analysis focuses on determining the level of sales at which total revenues equal total costs, resulting in neither profit nor loss. The components essential to this analysis include sales price, fixed costs, and variable costs. Sales price refers to the amount charged to customers for each unit sold. It directly affects revenue and the calculations needed to determine the break-even point. Fixed costs are expenses that do not vary with production volume, such as rent or salaries. These costs must be covered by sales revenue, making them a critical element in assessing how many units need to be sold to break even. Variable costs are those expenses that change in direct proportion to the production volume, such as materials and labor. Understanding these costs is vital, as they influence the contribution margin, which is the sales price minus variable costs. The choice related to the integration of demand forecasting is not a direct component of break-even analysis. While understanding market demand is important for setting sales strategies and projections, it is not a specific factor in calculating the break-even point itself. Break-even analysis is mathematically focused on costs and prices rather than broader market demand considerations. Thus, demand forecasting is a separate analysis used in conjunction with, but not a component of, break-even calculations.