What type of costs contain both a variable and fixed component?

Mixed costs are characterized by having both a variable component and a fixed component. This means that part of the cost remains constant regardless of the level of activity, while another part varies with the level of activity.

For instance, in the context of fire alarm systems, consider a service agreement that includes a fixed monthly fee plus additional costs for each service call. The fixed component ensures that a basic level of service is always available, while the variable component adjusts based on actual service demand.

In contrast, variable costs fluctuate directly with the level of service or production, like the cost of materials used in a project, while fixed costs remain unchanged regardless of activity levels, like rent for a facility. Overhead costs encompass both fixed and variable expenses associated with running a business but do not specifically denote the mixed nature of the costs themselves.

Thus, mixed costs uniquely represent the combination of both fixed and variable components, making them the correct choice for this question.