Question

EB4.

Roper Furniture manufactures office furniture and tracks cost data across their process. The following are some of the costs that they incur. Classify these costs as fixed or variable costs, and as product costs or period costs.

Wood used to produce desks ($125.00 per desk)
Production labor used to produce desks ($15 per hour)
Production supervisor salary ($45,000 per year)
Depreciation on factory equipment ($60,000 per year)
Selling and administrative expenses ($45,000 per year)
Rent on corporate office ($44,000 per year)
Nails, glue, and other materials required to produce desks (varies per desk)
Utilities expenses for production facility
Sales staff commission (5% of gross sales)

Answer 1

Fixed costs at Roper Furniture do not change with the level of production, whereas variable costs do. The wood, labor, nails, glue, and commissions are variable costs while the supervisor salary, depreciation, selling and administrative expenses, and rent are fixed costs. These costs are further categorized based on whether they are tied to production (product costs) or not (period costs).

Step-by-step explanation:

In the context of Roper Furniture's cost tracking, costs can be classified as fixed or variable, and as product costs or period costs. Fixed costs do not change with the level of production while variable costs do. Additionally, product costs are the costs incurred to create a product, whereas period costs are not directly tied to production and are expensed in the period they occur.

• Wood used to produce desks ($125.00 per desk) - Variable, Product Cost
• Production labor used to produce desks ($15 per hour) - Variable, Product Cost
• Production supervisor salary ($45,000 per year) - Fixed, Product Cost
• Depreciation on factory equipment ($60,000 per year) - Fixed, Product Cost
• Selling and administrative expenses ($45,000 per year) - Fixed, Period Cost
• Rent of corporate office ($44,000 per year) - Fixed, Period Cost
• Nails, glue, and other materials required to produce desks (varies per desk) - Variable, Product Cost
• Utilities expenses for production facility - These could be either fixed or variable, depending on how they are incurred, and are Product Costs
• Sales staff commission (5% of gross sales) - Variable, Period Cost