Question

XYZ Company reported the following cost information: June Cost A Cost B Cost c Units sold $16,380 $55,440 $37,380 42,000 units July $21,560 $89,080 $37,380 68,000 units Which of the above costs would be classified as a mixed cost? O Cost A O Cost B O Costc Both Cost A and Cost B are mixed costs all of the above costs are mixed costs none of the above costs are mixed costs

Answer 1

Fixed Cost is the cost which is independent of the level of production or business activity. It doesn't increase with the increase in the level of production or units of sales. Per unit cost will reduce as the unit produced / sold increases. Variable Cost is the cost which is depended on the level of production or business activity. It increases or decreases with the increase or decrease in the level of production or units of sales. Per unit cost will remain constant irrespective of unit sold. Mixed cost consists of variable cost and fixed cost. Mixed cost = Variable cost + Fixed Costs. June July Type of Cost Per unit Per unit Units Sold 42,000 68,000 Cost A $16,380 $0.39 $21,560 $0.32 Mixed Cost Cost B $55,440 $1.32 $89,080 $1.31 Variable Cost Cost C $37,380 $0.89 $37,380 $0.55 Fixed Cost Based on above discussion, Cost A would be classified as mixed cost.