Question

Determine whether each of the following is best described as a fixed, variable, or mixed cost with respect to product units.

1. Rubber used to manufacture athletic shoes.	5. Factory supervisor’s salary
2. Maintenance of factory machinery	6. Taxes on factory building
3. Packaging expenses	7. Depreciation expenses of warehouse
4. Wages of an assembly line worker paid on the basis of acceptable units produced.

Short answer

Answer

1. Rubber used to manufacture athletic shoes.	Variable Cost
2. Maintenance of factory machinery	Mixed Cost
3. Packaging expenses	Variable Cost
4. Wages of an assembly line worker paid on the basis of acceptable units produced.	Variable Cost
5. Factory supervisor’s salary	Fixed Cost
6. Taxes on factory building	Fixed Cost
7. Depreciation expenses of warehouse	Fixed Cost

Step-by-step solution

Step-By-Step SolutionStep 1: Definition of Cost Behavior

How the cost incurred by the business entity will change due to a change in the level of activity attained by the business entity is known as cost behavior.

Classification of cost

Variable Cost: The cost that will reflect a change due to a change in the output produced by the business unit is known as a variable cost.

Fixed Cost: The cost that remains constant at all production levels is known as a fixed cost.

Mixed Cost: The cost that contains the features of these two costs, i.e., variables and a fixed cost is known as mixed cost.