Question

Monthly production costs in Pesavento Company for two levels of production are as follows:Cost .............................2,000 Units..........................4,000Indirect Labor..............$10,000..............................$20,000Supervisory Salaries.....$5,000.................................$5,000Maintenance.................$4,000..................................$7,000Indicate which costs are variable, fixed, and mixed and give the reason for each answer.

Answer 1

Answer:

Variable Costs : Supervisory $5,000

Fixed Costs : Salaries $5,000

Mixed Cost : Maintenance $4,000

Explanation:

Variable Costs

These costs vary in direct proportion with the amount of production.

Examples : Materials and Labor

Fixed Costs

Theses costs do not vary with amount of production but stays the same in the relevant range.

Examples : Salaries of Mangers

Mixed Costs

These contain a variable cost element and a fixed cost element

Examples : Telephone Bill and Maintenance Costs