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Acc 561 week 5 exercise 18-1

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18-1 Classify costs as variable, fixed, or mixed.
Dousman Company reports the following total costs at two levels of production.
Cost 5000 units 10000 units Classification
Indirect labor $3,000 $6,000 variable cost
Property Taxes $7,000 $7,000 fixed
Direct labor $27,000 $54,000 variable
Direct materials $22,000 $44,000 variable
Depreciation $4,000 $4,000 fixed
Utilities $3,000 $5,000 mixed
Maintenance $9,000 $11,000 mixed
Here’s why.
Maintenance and utilities costs are mixed costs. In this case, the fixed-cost element is the cost of having the
service available. The variable-cost element is the cost of actually using the service. Another example of a
mixed cost is utility costs (electric, telephone, and so on), where there is a flat service fee plus a usage charge
(Kimmel, 2014). Indirect and direct labor,and direct materials are variable manufacturing costs as the change
in the level of activity or increase in volume of manufactured unit (5,000 to 10,000 units produced) influences
the total costs and the total variable costs increase in proportion to the increase in sales or production per unit,
however the per unit cost would remain constant. In contrast to fixed cost which I identified as depreciation
and property taxes. The change in the level of the production activity (5,000 to 10,000 units produced)of units
which doubled the variable costs, does not influence the total fixed costs it remained the same.

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Anonymous
Awesome! Perfect study aid.

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