Cost-volume-profit analysis assumes that all costs can be accurately described as either fixed or variable.

Question

Quizplus · Accepted Answer

Cost-volume-profit (CVP) analysis is based on the assumption that all costs can be categorized as either fixed (do not change with the level of activity) or variable (change directly with the level of activity), which is crucial for the analysis to predict how changes in sales volume affect costs and profit.

Cost-Volume-Profit Analysis Assumes That All Costs Can Be Accurately Described