Question

Deline and classify variable, fixed, and mixed costs. (101) С 520-1 Ronica (inmpany manufactures a single product. Anoual production costs incurred in the manufacturi Pinces are shown below for two levels of production: Costs Incurred Procluction 5,000 Coits 10,000 Units Direct matcrials $ 8,000 $16,000 Direct labour 9,500 19,000 Leilicies 2,000 3,300 Kent 4,000 4,000 Maintenance 8001 1,400 Supervisory salaries 1,000 1,000 Total cost S25,300 $44,700 Instructions (a) Define these terms: variable costs, fixed costs, and mixed costs. (b) Clawity cach production cont listed as variable, fixed, or mixed. (c) Calculate the expected production costs il 9,10 units are produced.

Answer 1

a.	Variable cost are those cost which has a fixed per unit cost and it changes with the production
	Fixed costs has a Fixed Total cost irrespective of the level of Production,it is opposite of Variable cost
	Mixed cost is also known as semi-variable cost where one part is variable cost which changes with
	the level of production while other part is fixed cost which does not changes with level of prodcution
b		5000 units	10,000 units	Classification
	Variable costs:
	Direct materials per unit	$1.60	$1.60	Variable
	Direct labor per unit	$1.90	$1.90	Variable
	Utilities[(3,300-2,000)/(10,000-5,000)]	$0.26	$0.26	Semi-Variable
	Maintainance[(1,400-800)/(10,000-5,000)]	$0.12	$0.12	Semi-Variable
	Fixed Costs:
	Utilities[3,300 - (10,000*$0.26)]	$700.00	$700.00	Semi-Variable
	Rent	$4,000.00	$4,000.00	Fixed
	Maintainance[1,400 - (10,000*$0.12)]	$200.00	$200.00	Semi-Variable
	Super visor salaries	$1,000.00	$1,000.00	Fixed
c		9000 units
	Direct materials cost	$14,400.00
	Direct labor cost	$17,100.00
	Variable utilities	$2,340.00
	Variable maintainance	$1,080.00
	Fixed utilities	$700.00
	Fixed maintainance	$200.00
	Rent	$4,000.00
	Super visor salaries	$1,000.00
	Total Costb of production	$40,820.00