Question

Classify each cost as being either variable or fixed with respect to the number of units produced and sold. Also classify each cost as either a period or a product cost.1. Hamburger buns in a Wendy's outlet. 2. Advertising by a dental office. 3. Apples processed and canned by Del Monte. 4. Shipping canned apples from a Del Monte plant to customers. 5. Insurance on a Bausch & Lomb factory producing contact lenses. 6. Insurance on IBM's corporate headquarters. 7. Salary of a supervisor overseeing the production of printers at Hewlett-Packard. 8. Commissions paid to automobile salespersons. 9. Depreciation of factory lunchroom facilities at a General Electric plant. 10. Steering wheels installed in BMWs.

Answer 1

1. Hamburger buns in a Wendy's outlet. (Variable) (Product)

2. Advertising by a dental office. (Fixed) (Period)

3. Apples processed and canned by Del Monte. (Variable) (Product)

4. Shipping canned apples from a Del Monte plant to customers. (Variable) (Period)

5. Insurance on a Bausch & Lomb factory producing contact lenses. (Fixed) (Product)

6. Insurance on IBM's corporate headquarters. (Fixed) (Period)

7. Salary of a supervisor overseeing the production of printers at Hewlett-Packard. (Fixed) (Product)

8. Commissions paid to automobile salespersons. (Variable) (Period)

9. Depreciation of factory lunchroom facilities at a General Electric plant. (Fixed) (Product)

10. Steering wheels installed in BMWs. (Variable) (Product)

Step-by-step explanation:

Fixed Cost: Fixed, and does not depend on production.

Variable Cost: Not fixed and varies according to production

Product Cost: Directly attributable to Product e.g. Direct Material, Direct Labour,etc.

Period Cost: Revenue expenditure, spread through time.