Monthly production costs in Pesavento Company for two levels of production are a
ID: 2379448 • Letter: M
Question
Monthly production costs in Pesavento Company for two levels of production are as follows:
Cost ........................................2,000 Units..........................4,000
Indirect Labor...............................................$10,000...........................................$20,000
Supervisory Salaries......................................$5,000.............................................$5,000
Maintenance...................................................$4,000.............................................$7,000
Indicate which costs are variable, fixed, and mixed and give the REASON for EACH answer.
Explanation / Answer
Indirect labour is variable cost as
=20000-10000/4000-2000=$5 per unit
Supervision salaries is fixed cost because it remains same at both levels of output . In other words,it remains same irrespective of level of production .
Maintainace is mixed cost because
=$7000-$4000/4000-2000
=$1.5
But $1.5*2000 is not equal to 4000
& $1.5*4000 is not equal to $7000
Hence it is mixed cost .
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