Classify the costs as either fixed costs, variable costs, or mixed cost.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Classify Costs
Cromwell Furniture Company manufactures sofas for distribution to several major retail chains. The following costs are incurred in the production and sale of sofas:
Required:
Classify the costs as either fixed costs, variable costs, or mixed cost.
a. Fabric for sofa coverings | |
b. Wood for framing the sofas | |
c. Legal fees paid to attorneys in defense of the company in a patent infringement suit, $25,000 plus $160 per hour | |
d. Salary of production supervisor | |
e. Cartons used to ship sofas | |
f. Rent on experimental equipment, $50 for every sofa produced | |
g. Straight-line |
|
h. Rental costs of warehouse, $30,000 per month | |
i. Property taxes on property, plant, and equipment | |
j. Insurance premiums on property, plant, and equipment, $25,000 per year plus $25 per $25,000 of insured value over $16,000,000 | |
k. Springs | |
l. Consulting fee of $120,000 paid to efficiency specialists | |
m. Electricity costs of $0.13 per kilowatt-hour | |
n. Salesperson's salary, $80,000 plus 4% of the selling price of each sofa sold | |
o. Foam rubber for cushion fillings | |
p. Janitorial supplies, $2,500 per month | |
q. Employer's FICA taxes on controller's salary of $180,000 | |
r. Salary of designers | |
s. Wages of sewing machine operators | |
t. Sewing supplies |
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