Chapter 2, Problem 21P

PROBLEM 2-21 Cost Classification [L02-1, L02-3, L02-4]

Listed below are costs found in various organizations.
1. Property taxes, factory.
2. Boxes used for packaging detergent produced by the company.
3. Salespersons’ commissions.
4. Supervisor’s salary, factory.
5. Depreciation, executive autos.
6. Wages of workers assembling computers.
7. Insurance, finished goods warehouses.
8. Lubricants for production equipment.
9. Advertising costs.
10. Microchips used in producing calculators.
11. Shipping costs on merchandise sold.
12. Magazine subscriptions, factory lunchroom.
13. Thread in a garment factory.
14. Billing costs.
15. Executive life insurance.
16. Ink used in textbook production.
17. Fringe benefits, assembly-line workers.
18. Yarn used in sweater production.
19. Wages of receptionist, executive offices.

Required:

Prepare an answer sheet with column headings as shown below. 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. 1f it is a manufacturing cost, indicate whether it would typically be treated as a direct cost or an indirect cost with respect to units of product. Three sample answers are provided for illustration.

				Manufacturing (Product) Cost
Costitem	Variableor Fixed	SellingCost	AdministrativeCost	Direct	Indirect
Direct labor ….	V			X
Executive salaries ….	F		X
Factoryrent ….	F				X