Question 1

Assumptions implicit in Bill French’s determination of his company’s breakeven point

1. French assumed that the variability of the variable costs is constant. He assumed a relatively
constant level of efficiency for machines and direct labor over all the range of operations.
2. Similarly, he assumed that the fixed costs are truly fixed over the full range of operations. He did
not consider the relevance of the cost.
3. He assumed that there is a constant relationship between the production and sales pattern by
calculating the break-even point based on sales.
4. He assumed that there is just one break-even point for the firm by taking the average of the 3
products.
5. He also assumed that the sales mix will remain constant. Total revenue and total expenses
behave in a linear manner over the relevant range.

He assumed that the break-even volume is the level of operation at which total costs are just covered.

He assumed that break-even point is at 1100000 units

He assumed that the sales volume will remained constant. He did not give room for increase on sales.