1. How should mixed costs be classified in CVP analysis? What approach is used to effect the appropriate classification?
2. "Cost-volume-profit (CVP) analysis is based entirely on unit costs." Do you agree? Explain.
3. Linda Fearn asks your help in constructing a CVP graph. Explain to Linda (a) how the break-even point is plotted, and (b) how the level of activity and dollar sales at the break-even point are determined.
The answer describes the meaning of mixed costs, the method by which it can be bifurcated by formula and plotting of CVP graph, and computation of break even point by using CVP graph.