Question

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 is a direct cost or an indirect cost with respect to units of product.

a. Property taxes, factory.
b. Boxes used for packaging detergent produced by the company.
c. Salespersons' commissions.
d. Supervisor's salary, factory.
e. Depreciation, executive autos.
f. Wages of workers assembling computers.
g. Insurance, finished goods warehouses.
h. Lubricants for production equipment.
i. Advertising costs.
j. Microchips used in producing calculators.
k. Shipping costs on merchandise sold.
l. Magazine subscriptions, factory lunchroom.
m. Thread in a garment factory.
n. Billing costs.
o. Executive life insurance.
p. Ink used in textbook production.
q. Fringe benefits, assembly-line workers.
r. Yarn used in sweater production.
s. Wages of receptionist, executive offices.

Answer 1

a. Property taxes, factory. Fixed Cost. Indirect Manufacturing Cost.

b. Boxes used for packaging detergent produced by the company. Variable cost. Direct Manufacturing cost.

c. Salespersons' commissions. Variable cost. Selling cost.

d. Supervisor's salary, factory. Fixed cost. Indirect manufacturing cost.

e. Depreciation, executive autos. Fixed cost. Administrative cost.

f. Wages of workers assembling computers. Variable cost. Direct manufacturing cost.

g. Insurance, finished goods warehouses. Fixed cost. Selling cost.

h. Lubricants for production equipment. Variable cost. Indirect manufacturing cost.

i. Advertising costs. Fixed cost. Selling costs.

j. Microchips used in producing calculators. Variable costs. Direct manufacturing cost.

k. Shipping costs on merchandise sold. Variable cost. Selling cost.

l. Magazine subscriptions, factory lunchroom. Fixed cost. Indirect manufacturing cost.

m. Thread in a garment factory. Variable cost. Indirect manufacturing cost.

n. Billing costs. Variable cost. Selling cost.

o. Executive life insurance. Fixed cost. Administrative cost.

p. Ink used in textbook production. Variable cost. Indirect manufacturing cost.

q. Fringe benefits, assembly-line workers. Variable cost. Indirect manufacturing cost.

r. Yarn used in sweater production. Variable cost. Direct manufacturing cost.

s. Wages of receptionist, executive offices. Fixed cost. Administrative cost.