Classifying all costs as fixed or variable with respect to sales volume is practical and frequently used, but the assumption often results in imprecise measurements.

Question

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While classifying costs as fixed or variable with respect to sales volume is practical, it can result in imprecise measurements as certain costs may have both fixed and variable components. This can lead to inaccuracies when predicting future costs or analyzing cost behavior.

Classifying All Costs as Fixed or Variable with Respect to Sales