Which statement is true about mixed costs?

• A. They contain only fixed components.
• B. They are purely variable and change with activity.
• C. They remain constant per unit regardless of activity.
• D. They have both fixed and variable components.

Answer: (D)

Mixed costs combine a fixed portion and a variable portion. This means there’s a constant amount that doesn’t change with activity, plus a part that increases as output grows. Total cost thus rises with activity, but not in direct proportion because the fixed portion stays the same within the relevant range. For example, a bill with a base charge plus a rate per unit: the base stays fixed while the per-unit cost adds as production increases. As a result, the cost per unit is not constant—it falls when more units are produced because the fixed portion is spread over more units. That’s why the statement that mixed costs have both fixed and variable components is the correct description. The other options describe purely fixed, purely variable, or constant per-unit cost, which don’t fit mixed costs.