To perform cost-volume-profit analysis, a company must be able to separate costs into fixed and variable components.

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Cost-volume-profit analysis requires the ability to separate costs into fixed and variable components in order to accurately assess the impact of changes in sales volume on the company's profitability. Fixed costs remain constant regardless of changes in production or sales volume, while variable costs increase or decrease in direct proportion to changes in volume. By understanding these cost distinctions, a company can determine the minimum level of sales needed to break even, as well as the amount of sales required to generate a desired level of profit.

To Perform Cost-Volume-Profit Analysis, a Company Must Be Able to Separate