Briefly Describe the Difference Between Fixed, Variable, and Mixed Costs

question 24

Essay

Briefly describe the difference between fixed, variable, and mixed costs. Give one example of each.

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Definitions:

Variable Costs

Costs that vary directly with the level of production or output, such as materials and labor.

Productive Capacity

The maximum output a system can produce in a specific period under normal working conditions.

Milling Machine

A machine tool used to machine solid materials by removing material in the form of chips using a rotating cutting tool.

Direct Labor Hours

The amount of time workers spend directly manufacturing a product or providing a service, used to allocate labor costs in production.