E17.2 Define and classify variable, fixed, and mixed costs. LO1 Massey & Co. manufactures a single product. Annual production costs incurred in the manufacturing process are shown below for two levels of production:

Costs incurred Production in units 5000 10 000 Production costs Total cost Cost/unit Total cost Cost/unit Direct materials $8 250 $1.65 $16 500 $1.65 Direct labour 9 500 1.90 19 000 1.90 Electricity 1 400 0.28 2 300 0.23 Rent 4 000 0.80 4 000 0.40 Maintenance 800 0.16 1 100 0.11 Supervisors’ salaries 1 000 0.20 1 000 0.10 Required

(a) Define the terms variable costs, fixed costs and mixed costs.

(b) Classify each cost above as either variable, fixed or mixed.