Question

Listed below are costs found in various organizations.

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.
1. Direct labor
2. Executive salaries
3. Factory rent
4. Property taxes, factory.
5. Boxes used for packaging detergent produced by the company
6. Salespersons' commissions
7. Supervisor's salary, factory
8. Depreciation, executive autos.
9. Wages of workers assembling computers
10. Insurance, finished goods warehouses
11. Lubricants for production equipment.
12. Advertising costs
13. Microchips used in producing calculators.

Answer 1

The following are the costs incurred and their types:

• 1. Direct labor - Fixed - manufacturing cost
• 2. Executive salaries - Fixed - administrative cost
• 3. Factory rent - Fixed - administrative cost
• 4. Property taxes, factory - Fixed - administrative cost
• 5. Boxes used for packaging detergent produced by the company - Variable - manufacturing cost
• 6. Salespersons' commissions - Variable - selling cost
• 7. Supervisor's salary, factory - Fixed - administrative cost
• 8. Depreciation, executive autos - Variable -
• 9. Wages of workers assembling computers - Variable - administrative cost
• 10. Insurance, finished goods warehouses - Variable - administrative cost
• 11. Lubricants for production equipment - Variable - administrative cost
• 12. Advertising costs - Variable - selling cost
• 13. Microchips used in producing calculators - Variable - manufacturing cost