Problem:
Fowler Company manufactures a single product. Annual production costs incurred in the manufacturing process are shown below for two levels of production.
Exercises
Costs Incurred
Production in Units 5,000 10,000
Total Cost/ Total Cost/
Production Costs Cost Unit Cost Unit
Direct materials $8,250 $1.65 $16,500 $1.65
Direct labor 9,400 1.88 18,800 1.88
Utilities 1,400 0.28 2,300 0.23
Rent 4,000 0.80 4,000 0.40
Maintenance 800 0.16 1,200 0.12
Supervisory salaries 1,000 0.20 1,000 0.10
Instructions
(a) Define the terms variable costs, fixed costs, and mixed costs.
(b) Classify each cost above as either variable, fixed, or mixed.