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.