How should mixed costs be classified in CVP analysis?
Mixed costs should be classified in their fixed and variable elements. This can be determined by using the High/Low method. The method takes the amount of costs acquired over a high point in time and also a low point in time. To determine the variable costs a company takes past costs and use the highest amount acquired and then the lowest amount acquired. Then the company subtracts the lowest from the highest in changes in cost. Then the company would divide that number from the difference in subtracting the lowest from the highest in activity. To determine the fixed costs the company takes the total variable cost and multiplies it by the highest and lowest change in costs. They use the same numbers as they did when figuring out variable costs. Then they take those two numbers and subtract it by its respective highest and lowest activity level. The number that comes about is the fixed cost. They both should be the same number. Because the calculations only use two fixed and two variabl
