Asked by Diwas Bhatt? on May 19, 2024
Verified
How should mixed costs be classified in CVP analysis? What approach is used to effect the appropriate classification?
Mixed Costs
Costs that have both a fixed and variable component, changing with the level of output but not directly proportional to it.
CVP Analysis
Cost-Volume-Profit Analysis is a technique in managerial accounting that examines the impact of cost and volume changes on a company’s operating and net income.
- Distinguish among variable, fixed, and mixed costs and analyze their influence on business operations.
- Understand the premises that form the foundation of CVP analysis and its constraints.
Verified Answer
MG
Marissa GreenMay 19, 2024
Final Answer :
For CVP analysis mixed costs must be classified into their fixed and variable elements. One approach to the classification of mixed costs is the high-low method.
Learning Objectives
- Distinguish among variable, fixed, and mixed costs and analyze their influence on business operations.
- Understand the premises that form the foundation of CVP analysis and its constraints.
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