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E22-1. Define and classify variable, fixed, and mixed costs. (LO 1) Bonita Company manufactures a single product. Annual production costs incurred in the manufacturing process
E22-1.
Define and classify variable, fixed, and mixed costs.
(LO 1)
Bonita Company 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 | 5,000 | 10,000 | ||
Production Costs | Total Cost | Cost/Unit | Total Cost | Cost/Unit |
Direct materials | $8,000 | $1.60 | $16,000 | $1.60 |
Direct labor | ?9,500 | ?1.90 | ?19,000 | ?1.90 |
Utilities | ?2,000 | ?0.40 | ??3,300 | ?0.33 |
Rent | ?4,000 | ?0.80 | ??4,000 | ?0.40 |
Maintenance | ???800 | ?0.16 | ??1,400 | ?0.14 |
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.
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