Question

Macon Vitamins sells a variety of vitamins and herbal supplements to small health food stores. Macon purchases the vitamins and supplements from leading manufacturers. Identify each of the following costs incurred by Macon Vitamins in terms of its cost behavior—variable, fixed, mixed, or step.

a. Vitamin C tablets
b. President’s salary
c. Sales commissions ($1.00 per case)
d. Straight line depreciation on office equipment
e. Shipping (billed in 100-pound increments)
f. Advertising
g. Telephone charges (monthly fee of $35 plus long distance charges)

Answer 1

The variable cost is the cost which increases or decreases with the level of output of a company. There is direct relationship between variable cost and output of a firm.

The fixed costs are the costs which remains the same with any level production.

A step cost refers to a cost which remains constant at a particular level and vary after that level.

A mixed cost is a combination of both variable and fixed cost. Such as electricity companies which charges a fixed amount as well as variable cost according to the units consumed.

Therefore, the list are as follows:

(a) Variable cost

(b) Fixed cost

(c) Variable cost

(d) Fixed cost

(e) Step cost

(f) Fixed cost

(g) Mixed cost