What is the concept of mixed costs?
Mixed costs contain components of both variable and fixed cost behavior patterns. Mixed costs are sometimes called semivariable or semifixed costs. The fixed component of a mixed cost is a minimum cost of supplying a resource, and the variable component is the costs that fluctuate depending on changes of activity levels. Suppose Friends Corporation uses rented machinery. The rental charges are $1,000 per year, plus $1 for each machine hour used. If the machinery is used for 1,000 hours, then the total rental charge is $2,000 ($1,000 + 1,000 hrs x $1).
