CVP analysis requires costs to be categorized as
A)either fixed or variable.
B)direct or indirect.
C)product or period.
D)standard or actual.

Question

Quizplus · Accepted Answer

CVP analysis is based on the assumption that costs can be categorized as either fixed or variable. Fixed costs do not change in total when production or sales volume changes, while variable costs change proportionally with changes in production or sales volume. This categorization is crucial for calculating and analyzing the breakeven point and the level of profitability at different levels of production or sales. Direct and indirect costs represent a different categorization, which is useful for other purposes such as cost allocation and cost control. Product and period costs are also useful for different purposes such as inventory valuation and income statement preparation. Standard and actual costs represent a comparison between expected and actual costs and are not relevant to CVP analysis.

CVP Analysis Requires Costs to Be Categorized as