Question

Determining cost behavior

Identify each cost below as variable (V), fixed (F), or mixed (M), relative to units sold. Explain your reason.

Units Sold 25 50 75 100

a. Total phone cost \( 150 \) 200 \( 250 \) 300

b. Materials cost per unit 35 35 35 35

c. Manager’s salary 3,000 3,000 3,000 3,000

d. Depreciation cost per unit 60 30 20 15

e. Total utility cost 400 650 900 1,150

f. Total cost of goods sold 3,125 6,250 9,375 12,500

Short answer

Answer

1. Mixed (M)

2. Variable (V)

3. Fixed (F)

4. Mixed (M)

5. Mixed (M)

6. Mixed (M)

Step-by-step solution

Meaning of variable, fixed, and mixed cost.

Variable costs are the costs that remain constant in per unit basis but keeps on changing in total amount with the change in level of sales.

Fixed costs are the costs that remain constant in total amount. It does not change with the change in sales level. It is also known as sunk cost.

Mixed costs are the costs that include variable and fixed components in it. These costs are also specified as Semi-variable costs.

Determining cost behavior

a. Total phone cost	Mixed (M)
b. Material cost per unit	Variable (V)
c. Manager’s salary	Fixed (F)
d. Depreciation cost per unit	Mixed (M)
e. Total utility cost	Mixed (M)
f. Total cost of goods sold	Mixed (M)