Horngren's Cost Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText - Access Card Package (16th Edition)
16th Edition
ISBN: 9780134642468
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 2, Problem 2.22E
Direct, indirect, fixed, and variable costs. California Tires manufactures two types of tires that it sells as wholesale products to various specialty retail auto supply stores. Each tire requires a three-step process. The first step is mixing. The mixing department combines some of the necessary direct materials to create the material mix that will become part of the tire. The second step includes the forming of each tire where the materials are layered to form the tire. This is an entirely automated process. The final step is finishing, which is an entirely manual process. The finishing department includes curing and quality control.
- 1. Costs involved in the process are listed next. For each cost, indicate whether it is a direct variable, direct fixed, indirect variable, or indirect fixed cost, assuming “units of production of each kind of tire” is the cost object.
| Costs: | |
| Rubber | Mixing department manager |
| Reinforcement cables | Material handlers in each department |
| Other direct materials | Custodian in factory |
| Night guard in factory | |
| Depreciation on mixing machines | Machinist (running the mixing machine) |
| Rent on factory building | Machine maintenance personnel in each department |
| Fire insurance on factory building | Maintenance supplies for factory |
| Factory utilities | Cleaning supplies for factory |
| Finishing department hourly laborers | Machinist (running the forming machines) |
- 2. If the cost object were the “mixing department” rather than units of production of each kind of tire, which preceding costs would now be direct instead of indirect costs?
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Chapter 2 Solutions
Horngren's Cost Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText - Access Card Package (16th Edition)
Ch. 2 - Define cost object and give three examples.Ch. 2 - Define direct costs and indirect costs.Ch. 2 - Prob. 2.3QCh. 2 - Name three factors that will affect the...Ch. 2 - Define variable cost and fixed cost. Give an...Ch. 2 - What is a cost driver? Give one example.Ch. 2 - What is the relevant range? What role does the...Ch. 2 - Explain why unit costs must often be interpreted...Ch. 2 - Prob. 2.9QCh. 2 - What are three different types of inventory that...
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