Final answer:
Business expenses are classified into fixed, variable, semi-fixed, and semi-variable costs based on how they change with production levels. Fixed costs remain constant, variable costs change with production volume, and semi-variable costs have both fixed and variable components. The classification depends on company-specific practices and industry norms.
Step-by-step explanation:
When analyzing business expenditures, expenses can be categorized as fixed costs, variable costs, semi-fixed costs (also known as mixed or semi-variable costs), based on how they change with the level of production or sales. Here is a classification of the listed items:
- Direct labour (V): This is typically variable cost as it changes with production levels.
- Depreciation of machinery (F): Generally a fixed cost since it is calculated over a period of time and does not vary with production levels.
- Factory rental (F): A fixed cost as it remains constant regardless of how much is produced.
- Supplies and other indirect materials (V): These are often variable as their usage depends on production volume.
- Advertising (SF or SV): Advertising can be semi-variable as a base level of advertising happens regardless of sales, but additional spending may vary with promotional activities.
- Maintenance of machinery (SF or SV): Maintenance can be semi-variable, with routine maintenance being somewhat fixed, but overall costs increasing if more repairs are needed due to higher production levels.
- Factory manager's salary (F): Salaries for managerial positions are usually fixed costs.
- Supervisory personnel (F): This cost is often fixed as well, as supervisors are typically salaried employees.
- Royalty payments (V): Royalties are often variable costs as they can be based on the amount produced or sold.
Note that the classification can be industry-specific and may vary depending on company policies, accounting practices, and the specifics of each item.