Mastery Problem: Cost Behavior and CVP Analysis - Mixed Costs and the High-Low Method

Mixed Costs

There are several ways to analyze mixed costs. First, you must be able to identify mixed cost and distinguish it from costs that have only fixed cost or variable cost characteristics. In the following table, identify which cost is described by each of the given scenarios.

Scenario A housekeeper makes $10 dollars per hour to clean hotel rooms. A cell phone plan costs $500 plus $0.50 for every minute of usage over 2,000 minutes. A widget factory pays $5 per widget on material costs A car lease costs $10,000 plus $5 for every mile driven over 10,000. Rent expense for a factory costs $20,000 per month. A widget factory buys a new machine with annual depreciation of $8,000. A farmer has a contract with a grocery chain that pays $5,000 guaranteed money plus $2 for every bushel of produce above 50,000 bushels. Fixed Cost Mixed Cost Variable Cost