Types of Costs Helena Company reports the following total costs at two levels of production.

Question

Types of Costs

Helena Company reports the following total costs at two levels of production.

	10,000 Units	20,000 Units
Direct materials	$20,000	$40,000
Maintenance	8,000	10,000
Direct labor	17,000	34,000
Indirect materials	1,000	2,000
Depreciation	4,000	4,000
Utilities	3,000	5,000
Rent	6,000	6,000

Classify each cost as variable, fixed, or mixed.

Accepted Answer

Direct materials, direct labor, and indirect materials are variable costs because the total cost doubles with the doubling in activity.
Depreciation and rent are fixed costs because the total cost does not vary with the change in activity.
Maintenance and utilities are mixed costs because the total cost changes, but the change is not proportional to the change in activity.

ACTION PLAN
• Recall that a variable cost varies in total directly and proportionately with each change in activity level.
• Recall that a fixed cost remains the same in total with each change in activity level.
• Recall that a mixed cost changes in total but not proportionately with each change in activity level.

Related exercise material: BE5.1, BE5.2, DO IT! 5.1, E5.1, E5.2, E5.4, and E5.6.

Question 5.DI.1: Types of Costs Helena Company reports the following total co...

This Question has been Answered.

Already have an account?

Login

Related Answered Questions