Question

would it be a good idea to keep mixed costs separate from fixed and variable costs? why or why not?

Answer 1

Costs are classified into the categories of fixed costs, variable costs and mixed costs. Fixed costs refer to those costs which do not change with the activity level within the relevant range. Variable costs refer to those costs that change in direct proportion to the production level. Mixed costs also known as semi-variable costs have properties of both fixed as well as variable costs due to presence of both fixed and variable components in them.

In my opinion it is a good idea for keeping the mixed costs separate from the fixed as well as variable costs. It provides a proper understanding of the mix of various elements of the mixed cost, which can help the business to predict that how the costs will change at the different activity levels and accordingly the decisions can be taken. It helps the business to have an appropriate system of costing and the proper budgeting.