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"There is no such thing as a fixed cost. All costs can be 'unfixed' given sufficient...

"There is no such thing as a fixed cost. All costs can be 'unfixed' given sufficient time." Do you agree? What is the implication of your answer for CVP analysis?

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Answer #1

I did not agree.

Fixed costs are costs that are not dependent on the volume of goods produced and services provided by the business. It will be constant throughout the business operations unlike other costs.

Cost volume analysis is an analysis done to determine how changes in cost and volume affects the company's operating income and net income. For performing this analysis, several assumptions are used. One among them is that the total fixed costs will be constant. So the classification of costs as fixed is important in cvp analysis.

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