Dye Company manufactures a single product. Annual production costs incurred in the manufacturing process are shown below for two levels of production.
|
Costs Incurred |
||||
|
5,000 |
10,000 |
|||
|
Production in Units |
Total |
Cost/ |
Total |
Cost/ |
|
Production Costs |
Cost |
Unit |
Cost |
Unit |
|
Direct materials |
$8,250 |
$1.65 |
$16,500 |
$1.65 |
|
Direct labor |
9,500 |
1.90 |
19,000 |
1.90 |
|
Utilities |
1,500 |
0.30 |
2,500 |
0.25 |
|
Rent |
4,000 |
0.80 |
4,000 |
0.40 |
|
Maintenance |
800 |
0.16 |
1,100 |
0.11 |
|
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.