Utilities including electricity, water and natural gas are usually mixed costs. You are charged a fixed rate for using a base amount and then pay an additional variable charge for any usage over the base amount. For example, your water company charges you a fixed $75 charge for using up to 500 gallons of water.

Types of costs

• Fixed costs. Fixed costs are costs that do not vary with the level of output in the short term.
• Variable costs. A variable cost varies in direct proportion with the level of output.
• Semi-variable costs.
• Total costs.
• Direct costs.
• Indirect costs.

The types of cost accounting are explained below the classification of major accounting costs.

• #1 – Direct Costs. Direct costs are among the most common.
• #2 – Indirect Costs.
• #3 – Fixed Costs.
• #4 – Variable Costs.
• #5 – Operating Costs.
• #6 – Opportunity Costs.
• #7 – Sunk Costs.
• #8 – Controllable Costs.

Mixed expenses consist of a constant or fixed portion and a variable portion. For example, sales salaries would be a mixed expense if each sales person’s compensation is $2,000 per month plus 3% of the sales generated by the employee. Automobile expense is a mixed expense in relationship to miles driven.

Labor is a semi-variable cost. Fixed costs remain the same, whether production increases or decreases. Wages paid to workers for their regular hours are a fixed cost. Any extra time they spend on the job is a variable cost.

Electricity is an example of a mixed cost. A company must incur a certain cost for basic electrical service. As the company increases its volume of activity, it runs more machines and runs them longer. The firm also may extend its hours of operation.