Mixed costs are very common in business and consist of a fixed cost element and a variable cost element. Fixed costs are a recurring, constant cost that does not vary when business activity varies. Variable costs are added costs associated with each unit of business activity the organization experiences. The relationship can be characterized by the following equation:

Total cost= Fixed cost + (Cost per unit) X (Number of units of business activity)

In a leading managerial accounting textbook, the authors discuss a hospitals total maintenance costs, and use regression analysis to estimate the fixed cost element of maintenance and the variable cost associated with the number of patient-days. The hospitals total maintenance costs and number of patient-days for seven months are listed in the following table and stored in the file MixedCosts.