Problem 1-1A Cost computation, classification, and analysis LO C2, C3 [The follo

Question

Problem 1-1A Cost computation, classification, and analysis LO C2, C3 [The following information applies to the questions displayed below.] Listed here are the total costs associated with the 2017 production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $485 each. Costs 1. Plastic for casing—$22,000 2. Wages of assembly workers—$88,000 3. Property taxes on factory—$6,000 4. Accounting staff salaries—$30,000 5. Drum stands (1,000 stands purchased)—$32,000 6. Rent cost of equipment for sales staff—$12,000 7. Upper management salaries—$190,000 8. Annual flat fee for factory maintenance service—$21,000 9. Sales commissions—$15 per unit 10. Machinery depreciation, straight-line—$46,000 Problem 1-1A Part 1 Required: 1. Classify each cost and its amount as (a) either variable or fixed and (b) either product or period. (The first cost is completed as an example.)

Explanation / Answer

1.

15000

(15*1000)

Variable cost are costs that change with change in level of production.

Fixed costs are costs that do not change with change in level of production.

Product costs are costs direct costs that are related to production.

Period costs are indirect costs that are related to selling and administrative expenses.

Cost by behaviour Cost by function Variable fixed product period

1.

Plastic for casing 22000 22000 2. Wages of assembly workers 88000 88000 3. Property taxes on factory 6000 6000 4. Accounting staff salaries 30000 30000 5. Drum stands 32000 32000 6. Rent cost of equipment for sales staff 12000 12000 7. Upper management salaries 190000 190000 8. Annual flat fee for factory maintenance service 21000 21000 9. Sales commissions

15000

(15*1000)

15000 10. Machinery depreciation, straight-line 46000 46000

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