Point x1 where px a bx is the breakeven volumeit is

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Unformatted text preview: ion. ORGANIZATION OF THE CHAPTER The chapter first addresses the nature of costs. Once terms and concepts have been defined, we can take up the subject of cost-volume-profit (CVP) analysis. We look at CVP analysis (sometimes called breakeven analysis) in its most basic form, and then examine a variety of special considerations that can serve to complicate it. THE NATURE OF COSTS Fundamental to any discussion of costs is the question of their behavior. Chapter 1 identified the distinction between production center and service center costs. But costs also can be assessed in terms of whether they are relatively fixed or relatively variable. In general, the fixed/variable distinction lets us see more clearly how a change in the volume of activity of a given cost center will affect cost behavior. To fully understand this idea, we also need to include the refinements of semi-variable and step-function costs. The four types of costs are shown in Exhibit 2-1. A discussion of each follows. ________________...
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