Fox Company manufactures a single product. Annual production costs incurred in the manufacturing process are shown below for two levels of production.

Instructions

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

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

Transcribed Image Text:

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 9.500 1.90 19,000 1.90 Utilities 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 Supervisory salaries 1,000 0.20 1,000 0.10