Asked by KG ajjahn hutchinson-baldwin on Jul 06, 2024
Verified
An assumption of CVP analysis is that all costs can be classified as either variable or fixed.
CVP Analysis
Cost-Volume-Profit (CVP) analysis is a managerial accounting technique used to determine the effects of changes in costs and volume on a company's profits.
Variable
An element, feature, or factor that is likely to vary or change; used in various contexts, including mathematical equations and statistical models.
Fixed
Pertains to costs or assets that do not fluctuate with changes in production level or sales volume.
- Grasp the principles and assumptions underlying Cost-Volume-Profit (CVP) analysis.
Verified Answer
AJ
Andrew JohnsonJul 09, 2024
Final Answer :
True
Explanation :
CVP analysis assumes that all costs can be classified as either variable or fixed, and this assumption simplifies the analysis of cost behavior for decision-making purposes. However, in reality, some costs may have both variable and fixed components, while others may not fit neatly into either category.
Learning Objectives
- Grasp the principles and assumptions underlying Cost-Volume-Profit (CVP) analysis.