For each of the following costs, identify whether the item is 1. A variable or f

Question

For each of the following costs, identify whether the item is
1. A variable or fixed cost?
2. Direct or indirect cost?
3. Controllable or uncontrollable cost?
For example: Plant Utilities would be a variable, indirect, and controllable cost.
Not all items will fit into each category. Items that do not fit a category should be labeled as not applicable.
1. Raw materials.
2. Staples used to secure packed boxes of the product.
3. Plant janitor’s wages.
4. Order processing clerk’s wages.
5. Advertising expenses.
6. Production worker’s wages.
7. Production supervisor’s salaries.
8. Sales force commissions.
9. Maintenance supplies used.
10. President’s salary.
11. Electricity cost for the office building.
12. Real estate taxes for the plant.
13. Production-run setup costs.
14. Depreciation of plant equipment.
15. Outbound shipping costs.

Explanation / Answer

To avoid clutter, I propose to use abbreviations as below 1. A variable or fixed cost - VC or FC 2. Direct or indirect cost - DC or IDC 3. Controllable or uncontrollable cost - C or UC 1. Raw materials - VC, DC, C 2. Staples used to secure packed boxes of the product - VC,IDC,C 3. Plant janitor’s wages - FC,IDC,UC 4. Order processing clerk’s wages - FC,IDC,UC 5. Advertising expenses - FC,IDC,C 6. Production worker’s wages - VC,DC,UC 7. Production supervisor’s salaries - FC,IDC,UC 8. Sales force commissions - VC,IDC,C 9. Maintenance supplies used - VC,IDC,C (Maint supplies cost can be negotiated & hence controllable) 10. President’s salary - FC,IDC,C (President's salary can be Perf linked & hence controllable) 11. Electricity cost for the office building - VC,IDC,C 12. Real estate taxes for the plant - FC,IDC,UC 13. Production-run setup costs - VC,DC,C 14. Depreciation of plant equipment - FC,IDC,UC 15. Outbound shipping costs - VC,IDC,C I have given my ipinion based on logic of contrllable costs as given by 2 examples above. If you feel otherwise, pl let me know so I can revisit these.

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