Two costs at Bradshaw Company appear below for specific months of operation. Mon

Question

Two costs at Bradshaw Company appear below for specific months of operation.

                                 Month           Amount          Units Produced

Delivery costs       September      $  40,000                40,000

                              October               55,000                60,000

Utilities                   September      $  84,000                40,000

                              October             126,000                60,000

Which type of costs are these?

Explanation / Answer

Answer:Delivery costs are mixed and utilities are variable.

Delivery Costs :

September = $40000/40000 units = $1

October = $55000 / 60000 units = $0.9167

Variable costs = (55000 - 40000) / ( 60000 - 40000) = $0.75

Fixed cost = $0.75 x 40000 + x = $40000 ; x = $10000

Delivery costs are mixed

Utilities costs :

September = $84000/40000 units = $2.1

October = $126000 / 60000 units = $2.1

Utilities costs are variable

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