Listed below are costs found in various organizations. For each cost item, indic

Question

Listed below are costs found in various organizations. For each cost item, indicate whether it would be variable or fixed with respect to the number of units produced and sold, and then whether it would be a selling cost, an administrative cost, or a manufacturing cost. If it is a manufacturing cost, indicate whether it would typically be treated as a direct cost or an indirect cost with respect to units of product. Three sample answers are provided for illustration. (If a cost classification is not application to a cost item, leave the cell blank.) Manufacturing (Product) Cost Variable or Selling Cost Administrative Cost Item Direct Indirect Fixed Variable Fixed Fixed Cost Ex. Direct labo Yes Executive salaries Yes Factory rent Yes 1. Property taxes, factory. 2. Boxes used for packaging detergent produced by the company 3. Salespersons' commissions 4. Supervisor's salary, factory 5. Depreciation, executive autos 6. Wages of workers assembling computers. 7. Insurance, finished goods warehouses 8. Lubricants for production equipment. 9. Advertising costs 10. Microchips used in producing calculators 11. Shipping costs on merchandise sold. 12. Magazine subscriptions, factory lunchroom. 13. Thread in a garment factory 14. Executive life insurance 15. Ink used in textbook production 16. Fringe benefits, production supervisors. 17. Yarn used in sweater production. 18. Wages of receptionist, executive offices

Explanation / Answer

Manufacturing (Product) Cost Cost Item Variable or Fixed Selling Cost Administrative Cost Direct Indirect 1 Property Taxes , Factory Fixed Yes 2 Boxes used for packaging detergent produced by the company Variable   Yes 3 Salesperson commission Variable   Yes 4 Supervisor salary Factory Fixed Yes 5 Depreciation,executive autos Fixed Yes 6 Wages of workers assembling computers Variable Yes 7 Insurance finished goods warehouse Fixed Yes 8 Lubricants for production equipment Variable Yes 9 Advertising costs Fixed Yes 10 Microchips used in producing calculators Variable Yes 11 Shipping cost on merchandise sold Variable Yes 12 Magazine subscriptions ,factory lunchroom Fixed Yes 13 Thread in garment factory Variable Yes 14 Executive life insurance Fixed Yes 15 Ink used in textbook production Variable Yes 16 Fringe benefits , production supervisors Fixed Yes 17 Yarn used in sweater production Variable Yes 18 Wages of receptionist executive officers Fixed Yes

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