Q19E - Horngren'S Financial And Managerial Accounting

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

Step-by-Step Solution

Answer

Answer

1. Mixed (M)

2. Variable (V)

3. Fixed (F)

4. Mixed (M)

5. Mixed (M)

6. Mixed (M)

Step 1: 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.

Step 2: 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)