Question

Question 47 (2.73 points) Select cost information for Seacrest Enterprises is as follows: 1,000 units of output Total Cost/Unit Direct materials $5,000 $ 5.00 Utilities expense $1,000 $ 1.00 Rent expense $4,000 $4.00 Based on this information: 5,000 units of output Total Cost/Unit $25,000 $5.00 $3.750 $ 0.75 $4,000 $ 0.80 O A ) Both direct materials and utilities expense are mixed costs. B) Utilities expense is a mixed cost and rent expense is a variable cost. C) Direct materials is a fixed cost and utilities expense is a mixed cost. D) Both direct materials and rent expense are variable costs. E) Utilities expense is a mixed cost and rent expense is a fixed cost.

Answer 1

Direct material is a variable cost since per unit direct material cost remains same even due to increase in output from 1,000 units to 5,000 units.

Utility expense is a mixed cost since per unit Utility expense and total Utility expense is changing due to increase in output from 1,000 units to 5,000 units.

Rent expense is a fixed cost since total rent expense is same even due to increase in output from 1,000 units to 5,000 units.

Hence, correct option is (E)

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