Problem 1-23 Cost Classification [LO1-1, LO1-3, LO1-4] Listed below are costs fo

Question

Problem 1-23 Cost Classification [LO1-1, LO1-3, LO1-4] Listed below are costs found in various organizations Required: 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. Cost istrative Indirect Direct Cost Item Yes Yes Executive Fixed Yes used for packaging d

Explanation / Answer

Cost item Variable or Fixed Selling Cost Administrative Cost Manufacturing (Product) Cost Direct Indirect 1 Property taxes, factory F Yes 2 Boxes used for packaging detergent produced by the company V Yes 3 Salespersons’ commissions V Yes 4 Supervisor’s salary, factory F Yes 5 Depreciation, executive autos F Yes 6 Wages of workers assembling computers V Yes 7 Insurance, finished goods warehouses F Yes 8 Lubricants for production equipment V Yes 9 Advertising costs F Yes 10 Microchips used in producing calculators V Yes 11 Shipping costs on merchandise sold V Yes 12 Magazine subscriptions, factory lunchroom F Yes 13 Thread in a garment factory V Yes 14 Executive life insurance F Yes 15 Ink used in textbook production V Yes 16 Fringe benefits, assembly-line workers V Yes 17 Yarn used in sweater production V Yes 18 Wages of receptionist, executive offices F Yes

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