Unformatted text preview: LO 1 627 Mixed Costs
A mixed cost has both fixed and variable
A mixed cost has both fixed and variable
components. Consider the example of utility cost.
components. Consider the example of utility cost.
Total Utility Cost Y
dc
ixe
m
al
t
To st
o
Variable
Cost per KW Activity (Kilowatt Hours) X Fixed Monthly
Utility Charge
LO 1 628 Mixed Costs Total Utility Cost Y
dc
ixe
m
al
t
To st
o
Variable
Cost per KW Activity (Kilowatt Hours) X Fixed Monthly
Utility Charge
LO 1 629 Mixed Costs Example
If your fixed monthly utility charge is $40, your
If
variable cost is $0.03 per kilowatt hour, and your
monthly activity level is 2,000 kilowatt hours,
what is the amount of your utility bill?
what Y = a + bX
Y = $40 + ($0.03 × 2,000)
Y = $100
LO 1 630 Analysis of Mixed Costs
Account Analysis and the Engineering Approach
Each account is classified as either
Each account is classified as either
variable or fixed based on the analyst’s
variable or fixed based on the analyst’s
knowledge of how the account behaves.
knowledge of how the account behaves. Cost estimates are based on an
Cost estimates are based on an
Cost
Cost
evaluation of productio...
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 Winter '07
 ManagerialAccounting
 relevant range, Fixed Monthly, Curvilinear Cost

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