Chapter 6, Problem 1PA

Classify costs

Seymour Clothing 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:

Shipping boxes used to ship orders

Consulting fee of $200,000 paid to industry specialist for marketing advice

Straight-line depreciation on sewing machines

Salesperson's salary, $10,000 plus 2% of the total sales

Fabric

Dye

Thread

Salary of designers

Brass buttons

Legal fees paid to attorneys in defense of the company in a patent infringement suit, $50,000 plus $87 per hour

Insurance premiums on property, plant, and equipment, $70,000 per year plus $5 per $30,000 of insured value over $8,000,000

Rental costs of warehouse, $5,000 per month plus $4 per square foot of storage used

Supplies

Leather for patches identifying the brand on individual pieces of apparel

Rent on plant equipment, $50,000 per year

Salary of production vice president

Janitorial services, $2,200 per month

Wages of machine operators

Electricity costs of $0.10 per kilowatt-hour

Property taxes on property, plant, and equipment

Instructions

Classify the preceding costs as either fixed, variable, or mixed. Use the following tabular headings and place an X in the appropriate column. Identify each cost by letter in the cost column.