Question

The following is a list of various costs of producing T-shirts. Classify each cost as either a variable, fixed, or mixed cost for units produced and sold.

(a) Ink used for screen printing
(b) Warehouse rent of $8,000 per month plus $0.50 per square foot of storage used
(c) Thread
(d) Electricity costs of $0.038 per kilowatt-hour
(e) Janitorial costs of $4,000 per month
(f) Advertising costs of $12,000 per month
(g) Accounting salaries
(h) Color dyes for producing different colors of T-shirts
(i) Salary of the production supervisor
(j) Straight-line depreciation on sewing machines
(k) Salaries of internal pattern designers
(l) Hourly wages of sewing machine operators
(m) Property taxes on factory, building, and equipment
(n) Cotton and polyester cloth
(o) Maintenance costs with sewing machine company (the cost is $2,000 per year plus $0.001 for each machine hour of use).

Answer 1

To classify the costs as variable, fixed, or mixed, we need to understand the characteristics of each type of cost. Let's go through the list. The ink used for screen printing would be considered a variable cost, while the warehouse rent and storage cost would be a mixed cost. Thread would be a variable cost, and electricity costs would vary with usage. Janitorial costs and advertising costs are fixed costs, while accounting salaries are also fixed. Color dyes for different colors of T-shirts would be a variable cost. The salary of the production supervisor, straight-line depreciation on sewing machines, salaries of internal pattern designers, property taxes, cotton and polyester cloth, and maintenance costs with the sewing machine company were all classified as fixed costs or variable costs depending on the characteristics of each cost.

Step-by-step explanation:

To classify each cost as either a variable, fixed, or mixed cost, we need to understand the characteristics of each type of cost.

1. Ink used for screen printing: This cost would be considered a variable cost because it varies directly with the number of units produced and sold. The more T-shirts produced, the more ink will be used.
2. Warehouse rent of $8,000 per month plus $0.50 per square foot of storage used: This cost is a mixed cost. The $8,000 per month is a fixed cost because it does not change regardless of the number of units produced. However, the $0.50 per square foot cost is a variable cost as it varies with the amount of storage used.
3. Thread: This cost would be considered a variable cost because it varies directly with the number of units produced and sold. The more T-shirts produced, the more thread will be used.
4. Electricity costs of $0.038 per kilowatt-hour: This cost is a variable cost as it varies with the amount of electricity used. The more production and usage of sewing machines, the higher the electricity costs.
5. Janitorial costs of $4,000 per month: This cost is a fixed cost as it does not change regardless of the number of units produced and sold.
6. Advertising costs of $12,000 per month: This cost is a fixed cost as it does not change regardless of the number of units produced and sold.
7. Accounting salaries: This cost is a fixed cost as it does not change regardless of the number of units produced and sold.
8. Color dyes for producing different colors of T-shirts: This cost would be considered a variable cost because it varies directly with the number of units produced and sold. The more colors of T-shirts produced, the more color dyes will be used.
9. Salary of the production supervisor: This cost is a fixed cost as it does not change regardless of the number of units produced and sold.
10. Straight-line depreciation on sewing machines: This cost is a fixed cost as it does not change regardless of the number of units produced and sold.
11. Salaries of internal pattern designers: This cost is a fixed cost as it does not change regardless of the number of units produced and sold.
12. Hourly wages of sewing machine operators: This cost is a variable cost as it varies with the number of sewing machine hours used. The more units produced, the more sewing machine hours will be required.
13. Property taxes on factory, building, and equipment: This cost is a fixed cost as it does not change regardless of the number of units produced and sold.
14. Cotton and polyester cloth: This cost would be considered a variable cost because it varies directly with the number of units produced and sold. The more T-shirts produced, the more cloth will be used.
15. Maintenance costs with sewing machine company: This cost is a mixed cost. The $2,000 per year is a fixed cost because it does not change regardless of the number of units produced. However, the $0.001 per machine hour cost is a variable cost as it varies with the number of machine hours used.