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

Manufacturing (Product) Cost
Variable or Fixed Selling Cost Administrative Cost Direct Indirect
Ex. Direct labor Variable Yes
Executive Salaries Fixed Yes
Factory rent Fixed 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, materials handling workers
17. Yarn used in sweater production
18. Wages of receptionist, executive offices

Answer 1

1. Property taxes, factory - Fixed - Manufacturing indirect cost

2. Boxes used for packaging detergent produced by the company - Variable - Manufacturing direct cost

3. Salespersons' commissions - Variable - Selling cost

4. Supervisor's salary factory - Fixed - Manufacturing indirect cost

5. Depreciation executive autos - Fixed - Administrative Cost

6. Wages of workers assembling computers - Variable - Manufacturing direct cost

7. Insurance, finished goods warehouses - Fixed - Selling cost

8. Lubricants for production equipment - Variable - Manufacturing indirect cost

9. Advertising costs - Fixed - Selling cost

10. Microchips used in producing calculators - Variable - Manufacturing direct cost

11. Shipping costs on merchandise sold - Variable - Selling cost

12. Magazine subscriptions, factory lunchroom - Fixed - Manufacturing indirect cost

13. Thread in a garment factory - Variable - Manufacturing indirect cost

14. Executive life insurance - Fixed - Administrative Cost

15. Ink used in textbook production - Variable - Manufacturing indirect cost

16. Fringe benefits, materials handling workers - Variable - Manufacturing indirect cost

17. Yarn used in sweater production - Variable - Manufacturing direct cost

18. Wages of receptionist, executive offices - Fixed - Administrative Cost