The following information was collected for one of the costs at Demetra Manufacturing Corporation over the past two years: Assuming that there has been no change in the cost structure over the last two years and this activity is within the relevant range,this cost at Demetra would best be described as a:
A)fixed cost
B)mixed cost
C)step-variable cost
D)true variable cost

Question

The following information was collected for one of the costs at Demetra Manufacturing Corporation over the past two years:  Assuming that there has been no change in the cost structure over the last two years and this activity is within the relevant range,this cost at Demetra would best be described as a:
A)fixed cost 
B)mixed cost 
C)step-variable cost 
D)true variable cost

Quizplus · Accepted Answer

Variable component of cost:
Variable cost = Change in costs F1F1F1S1F1F1F10 Change in units
Variable cost = ($147,000 - $125,000) F1F1F1S1F1F1F10 (6,000 - 5,000)
Variable cost = $22.00 per unit
Fixed cost:
High units: $147,000 - $22.00 F1F1F1S1F1F1F10 6,000 = $15,000
Low units: $125,000 - $22.00 F1F1F1S1F1F1F10 5,000 = $15,000
Since there is a variable component and a fixed component,this cost would be considered to be a mixed cost.

The Following Information Was Collected for One of the Costs