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King 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
Direct materials
$8,250
$1.65
$16,500
Direct labor
9,500
1.90
19,000
Utilities
1,500
0.30
2,500
0.25
Rent
4,000
0.80
0.40
Maintenance
800
0.16
1,100
0.11
Supervisory salaries
1,000
0.20
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.
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