The following data have been collected for four different manufacturing cost ite

Question

The following data have been collected for four different manufacturing cost items: Costs at 100 units $8,000 $5,000 $6,500 $6,700 Costs at 140 units $10,560 $5,000 $9,100 $8,580 Item Which of the following classifications of these cost items by cost behavior is correct? W is variable, X is fixed, Y is mixed, Z is variable W is mixed, X is fixed, Y is variable, Z is mixed W is variable, X is fixed, Y is variable, Z is variable W is mixed, X is fixed, Y is mixed, Z is mixed None of the above are correct

Explanation / Answer

Answer: W is mixed, X is fixed, Y is variable, Z is mixed.

W: Total cost at 100 units and 140 units is different hence it is not fixed. Per unit cost at 100 units = $8000/100 = $80 while at 140 units it is $10560/140 = $75.43 hence, it is not variable. Thus, it is mixed.

X: Total cost is constant at 100 units and 140 units hence it is fixed.

Y: Per unit cost at 100 units = $6500/100 = $65 and per unit cost at 140 units = $9100/140 = $65. Hence, cost is variable.

Z: Total cost at 100 units and 140 units is different hence it is not fixed. Per unit cost at 100 units = $6700/100 = $67 while at 140 units it is $8580/140 = $61.29 hence, it is not variable. Thus, it is mixed.

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