Chapter 6, Problem 1PB

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:

Fabric for sofa coverings

Wood for framing the sofas

Legal fees paid to attorneys in defense of the company in a patent infringement suit, $25,000 plus $160 per hour

Salary of production supervisor

Cartons used to ship sofas

Rent on experimental equipment, $50 for every sofa produced

Straight-line depreciation on factory equipment

Rental costs of warehouse, $30,000 per month

Property taxes on property, plant, and equipment

Insurance premiums on property, plant, and equipment, $25,000 per year plus $25 per $25,000 of insured value over $16,000,000

Springs for seat cushions

Consulting fee of $120,000 paid to efficiency specialists

Electricity costs of $0.13 per kilowatt-hour

Salesperson’s salary, $80,000 plus 4% of the selling price of each sofa sold

Foam rubber for cushion fillings

Janitorial supplies, $2,500 per month

Employer's FICA taxes on controller's salary of $180,000

Salary of designers

Wages of sewing machine operators

Sewing supplies

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.