Asked by Danielle Thompson on Jun 30, 2024
Verified
Cost-volume-profit analysis requires management to classify all costs as either fixed or variable with respect to production or sales volume within the relevant range of operations.
Cost-Volume-Profit Analysis
An accounting method used to determine the effects of changes in costs and volume on a company's profits.
Relevant Range
The range of activity within which the assumptions about fixed and variable cost behavior are valid.
- Recognize the importance of classifying costs accurately within the relevant range for effective CVP analysis.
Verified Answer
JK
Jenny KleierJul 06, 2024
Final Answer :
True
Explanation :
Cost-volume-profit analysis relies on the classification of costs into fixed and variable categories based on their behavior with respect to changes in production or sales volume. This is necessary in order to accurately calculate break-even points, target profits, and other important metrics.
Learning Objectives
- Recognize the importance of classifying costs accurately within the relevant range for effective CVP analysis.
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