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Classying costs sets a basis for financial analysis of a program and for requesting reimbursement from subrecipients for the full costs of providing services.

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What is the first step in classifying costs according to behaviour?

The first step in classifying costs according to behavior is to identify and categorize costs as either fixed, variable, or mixed. Fixed costs remain constant regardless of production levels, while variable costs change in direct proportion to production volume. Mixed costs contain both fixed and variable components. Understanding these classifications helps in analyzing how costs will respond to changes in business activity.


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