The classification of fixed, variable, and semivariable costs

Complete the following sentences by inserting the correct terms.

Over the short run, operating costs that vary directly with sales are calledvariable costs. However, over the long run, all costs are $.$

Consider the cost structure of European Satellite Corporation:

Review the traditional format income statement for European Satellite Corporation that follows, and classify the indicated costs as being fixed, semivariable, or variable in nature.

European Satellite Corporation

Income Statement

for the Year Ending June $30$

Type of cost

Net sales $$11,525,837$

Cost of goods sold:

Direct materials $2,996,718$

Direct labor $2,535,684$

Overhead expenses:

Depreciation on manufacturing equipment $461,033$

Electric utility expense $230,517$

Total cost of goods sold $6,223,952$

Gross profit $5,301,885$

Operating expenses:

Sales commission expense $461,033$

Depreciation on buildings and property $691,550$

Total operating expenses $1,152,583$

Earnings before interest and taxes $($EBIT$)4,149,302$

Interest expense $806,809$

Earnings before taxes $($EBT$)3,342,493$

Taxes $(40\%)1,336,997$

Net income $$2,005,496$

Preferred stock dividends $311,198$

Earnings available to common shareholders $$1,694,298$