Which of the following is a limitation of breakeven analysis?

Breakeven analysis is a financial tool used to determine the point at which total revenue equals total costs, meaning that the business neither makes a profit nor incurs a loss. One significant limitation of breakeven analysis is the assumption that every product made is sold. This assumption does not account for inventory, unsold goods, or variations in demand, which can lead to inaccuracies in financial planning.

In reality, a business may produce more products than it can sell, potentially affecting profitability and cash flow. By assuming that all produced items will be sold, breakeven analysis can give a false sense of security regarding financial stability. This limitation is crucial for businesses that experience fluctuations in demand, seasonal sales patterns, or operate in highly competitive markets where inventory might not sell as anticipated.

The other options do not reflect genuine limitations of breakeven analysis. For instance, breakeven analysis can be applied to multiple products, and it does not provide an in-depth breakdown of customer preferences or guarantee profits, indicating that those factors are handled differently in financial analysis.