Which of the following best describes mixed costs?

Mixed costs are characterized by containing both fixed and variable components. This means that a portion of the cost remains constant regardless of the level of activity or production, while another portion varies directly with changes in the workload or output. For example, a company's utility bill might have a fixed base charge (the fixed component) plus additional fees that increase with usage (the variable component). This dual nature allows mixed costs to respond to changes in activity levels while still maintaining some level of predictability in budgeting.

Understanding mixed costs is crucial for effective financial planning and analysis, as it impacts how businesses forecast expenses based on different activity levels. This distinction also aids in determining how costs will behave if production scales up or down, which is essential for decision-making in project management and operational efficiency.