SOLUTIONS TO EXERCISES

EXERCISE 22-1

(a) The determination as to whether a cost is variable, fixed, or mixed can be made by comparing the cost in total and on a per-unit basis at two different levels of production.

| |Variable Costs | |Vary in total but remain constant on a per-unit basis. |
| |Fixed Costs | |Remain constant in total but vary on a per-unit basis. |
| |Mixed Costs | |Contain both a fixed element and a variable element. Vary both in total and on a per-unit basis. |

(b) Using these criteria as a guideline, the classification is as follows:

| |Direct materials | |Variable | |Rent | |Fixed |
| |Direct labor | |Variable | |Maintenance | |Mixed |
| |Utilities | |Mixed | |Supervisory salaries | |Fixed |

EXERCISE 22-2

(a) Maintenance Costs:

[pic] = [pic] = $5 variable cost per machine hour

| | | |800 | |300 |
| | | |Machine Hours | |Machine Hours |
| | | | | | |
| |Total costs | |$4,900 | |$2,400 |
|