IDENTIFYING FIXED, VARIABLE, MIXED, AND STEP COSTS Consider each of the following independent situations:

a. A computer service agreement in which a company pays $150 per month and $15 per hour of technical time.

b. Fuel cost of the company’s fleet of motor vehicles.

c. The cost of beer for a bar.

d. The cost of computer of computer printers and copiers in your college.

e. Rent for a dental office.

f. The salary of a receptionist in a law firm.

g. The wages of counter help in a fast-food restaurant.

h. The salaries of dental hygienists in a three-dentist office. One hygienist can take care of 120 cleanings per month.

i. Electricity cost, which includes a $15 per month billing charge and an additional amount depending on the number of kilowatt-hours used.

Required:

. For each situation, describe the cost as one of the following: fixed cost, variable cost, mixed cost, or step cost. (Hint: First, consider what the driver or output measure is.

If additional assumptions are necessary to support your cost type decision, be sure to write them down.)

Example: Raw materials used in production—Variable cost

. Change your assumption(s) for each situation so that the cost type changes to a different cost type. List the new cost type and the changed assumption(s) that gave rise to it.

Example: Raw materials used in production. Changed assumption—the materials are difficult to obtain, and a year’s worth must be contracted for in advance. Now, this is a fixed cost. (This is the case with diamond sales by DeBeers Inc. to its sightholders. See the following website for information: http://www.keyguide

.net/sightholders/.)

Problem