In: Accounting
In 200 words or more, What is meant by mixed costs in Accounting and what are some examples. Original work please.
There are three types of costs in accounting i.e. variable, fixed and mixed. The mixed costs has components of both variable and fixed costs. The formula for a mixed cost is y=a+bx, where a is the fixed cost and b the variable cost per unit.
It is diffiicult to analyse the way mixed costs behave. For this purpose, there are two methods which can be used - the graph method and the high low method. The graph method is used by plotting the costs at various levels to identify the area which represents fixed cost. The high low method uses the highest production point and the lowest production point to analyze the variable and fixed component.
The examples of mixed costs are given below:
The rental for a business site which has a fixed cost of $10000 plus $100 for any additional tenant is an example of a mixed cost.
For example, the production cost for 10000 units is $100000. For every additonal unit over 10000 units , there is an additional charge of $100.It is a mixed cost.