Question

Hunter's Game Design produces games. Listed below are selected cost items for the game production. Classify each cost as either fixed or variable, and either a product or a period cost by placing an x in the appropriate boxes. Cost by behavior Cost by function Variable Fixed Product Period Plastic for games………… Assembly labor................................. Factory property taxes……………. Accounting staff salaries…………. Sales office rent………………… Sales manager's salary……………. Depreciation on factory equipment………………………… Sales commissions………………

Answer 1

Hunter's Game Design

Classification of Cost by behavior and function

Cost Item Behavior Function

Variable Fixed Product Period

Plastic for games………… X X

Assembly labor................................. X X

Factory property taxes……………. X X

Accounting staff salaries…………. X X

Sales office rent………………… X X

Sales manager's salary……………. X X

Depreciation on factory equipment…… X X

Sales commissions……………… X X

Step-by-step explanation:

Cost behavior can be classified as either variable or fixed. Variable cost varies in total value with the total quantity while the unit cost is fixed. Fixed cost does not vary in total.

Furthermore, variable and fixed costs can be product cost or a period cost. A product cost is separately identifiable with the product. It is tied to the product. A period cost cannot be specifically attributed to the product. It can only be attributable to the period under which the cost is incurred. The salaries of an office worker is fixed in behavior and is a period cost. On the other hand, the factory workers' wages are not fixed in behavior but variable and they can be directly linked to the goods being produced and not to the period when they are incurred.