7. How should mixed costs be classified in CVP analysis? What approach is used to effect the appropriate classification? Mixed costs should be classified or broken down under their fixed and variable costs portions. Depending on the figures being compared a High-Low Method should be most appropriate for calculating figures. The approach that is used in each situation of classification of mixed costs is basically the same, like the fixed and variable costs are given then organized in a chart that shows the changes from the beginning cost to the ending cost. However some companies will have a different method of arranging the fixed and variable costs because they are trying to adjust figures to make a profit for their company. As the levels of profit or activity go up the variable is the one that usually reflects this change of increase or decrease the fixed portion usually stays the same. Depending what the situation in the company’s profit this will determine if the fixed or
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This note was uploaded on 01/07/2012 for the course COM 155 155 taught by Professor Shepherd during the Spring '10 term at University of Phoenix.