The results from the tool are subject to two underlying assumptions:

1. Variable expenses increase or decrease in direct and exact proportion to the change in sales volume
2. Fixed and other expenses do not change with sales volume movements.

Both assumptions should be evaluated for impact in relation to:

• volume measured in quantity, rather than dollar-value terms
• changes in product mix
• changes in methods of manufacture or process
• inflation.

The tool calculates changes required in direct proportion to volume changes.

Remember, this may not always be the case in the real world.