FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
In applying the high-low method of cost estimation to mixed costs, how is the total fixed cost estimated?
Expert Solution
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Step 1 Concept of mixed cost , variable cost and fixed cost
Mixed cost also called the semi variable cost . Mixed cost contains both fixed and variable cost .
Example - Electricity charges ( Minimum fixed charge plus consumption charge)
Fixed cost - Fixed cost is the cost that remains constant irrespective of the production activity of the entity .
Example - Office rent , Salary to Office staff , Watch man salary etc
Variable cost - Variable cost changes with the change in number of units of production.
Example - Direct Material , Direct labour etc
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- Give the general formula for a mixed cost. What does each term represent? Provide an example of a product or service with a mixed cost.arrow_forwardWhat is a mixed cost? Give an example.arrow_forwardA cost that has characteristics of both a variable cost and a fixed cost is called a Oa. variable/fixed cost Ob. sunk cost Oc. discretionary cost Od, mixed costarrow_forward
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