A major simplifying assumption of cost-volume-profit analysis is that costs can be classified as either variable or fixed with respect to a single measure of the volume of output activity.

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Cost-volume-profit analysis assumes that costs can be classified as either variable or fixed based on changes in a single measure of output activity, such as units produced or sales revenue. This simplifying assumption allows for the development of a straightforward analysis of how changes in volume affect costs, revenues, and profits.

A Major Simplifying Assumption of Cost-Volume-Profit Analysis Is That Costs