Classify Costs Peak Apparel Co. manufactures a variety of clothing types for distribution to several major retail chains. The following costs are incurred in the production and sale of blue jeans: Instructions: Identify each cost listed below as a variable cost, fixed cost, or mixed cost. a. Shipping boxes used to ship orders b. Consulting fee of $200,000 paid to industry specialist for marketing advice c. Straight-line depreciation on sewing machines d. Salesperson’s salary, $10,000 plus 2% of the total sales e. Fabric f. Dye g. Thread h. Salary of designers i. Brass buttons j. Legal fees paid to attorneys in defense of the company in a patent infringement suit, $50,000 plus $87 per hour k. Insurance premiums on property, plant, and equipment, $70,000 per year plus $5 per $30,000 of insured value over $8,000,000 l. Rental costs of warehouse, $5,000 per month plus $4 per square foot of storage used m. Supplies n. Leather for patches identifying the brand on individual pieces of apparel o. Rent on plant equipment, $50,000 per year p. Salary of production vice president q. Janitorial services, $2,200 per month r. Wages of machine operators s. Electricity costs of $0.10 per kilowatt-hour t. Property taxes on property, plant, and equipment

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Classify Costs

Peak Apparel Co. manufactures a variety of clothing types for distribution to several major retail chains. The following costs are incurred in the production and sale of blue jeans:

Instructions:

Identify each cost listed below as a variable cost, fixed cost, or mixed cost.

a.	Shipping boxes used to ship orders
b.	Consulting fee of $200,000 paid to industry specialist for marketing advice
c.	Straight-line depreciation on sewing machines
d.	Salesperson’s salary, $10,000 plus 2% of the total sales
e.	Fabric
f.	Dye
g.	Thread
h.	Salary of designers
i.	Brass buttons
j.	Legal fees paid to attorneys in defense of the company in a patent infringement suit, $50,000 plus $87 per hour
k.	Insurance premiums on property, plant, and equipment, $70,000 per year plus $5 per $30,000 of insured value over $8,000,000
l.	Rental costs of warehouse, $5,000 per month plus $4 per square foot of storage used
m.	Supplies
n.	Leather for patches identifying the brand on individual pieces of apparel
o.	Rent on plant equipment, $50,000 per year
p.	Salary of production vice president
q.	Janitorial services, $2,200 per month
r.	Wages of machine operators
s.	Electricity costs of $0.10 per kilowatt-hour
t.	Property taxes on property, plant, and equipment

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