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Costs which are always relevant in decision making are those costs which are:
variable
avoidable
sunk
fixed
Distinctions between fixed and variable costs are important. Asactivity increases, total variable costs increase, but fixed costsremain the same. This is accurate within the relevant range.Activity changes outside the relevant range can result in increasesin either fixed or variable costs. Describe how an aviation firmdistinguishes between fixed and variable costs. Provide specificexamples. In addition, explain whether fixed cost items or variablecost items get any priority in your firmâs internal decisions todistribute available funds.
CVP analysis assumes all of the following except:
a. all costs are variable or fixed
b. units manufactured equal units sold
c. total variable costs remain the same over the relevant range
d. total fixed costs remain the same over the relevant range
