Question

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. If it is a manufacturing cost, indicate whether it is a direct cost or an indirect cost with respect to units of product.
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

Answer 1

Answer:

1. Property taxes, factory - Fixed cost and an indirect manufacturing cost

2. Boxes used for packaging detergent produced by the company  - Variable and direct manufacturing cost.

3. Salespersons' commissions  - Variable and selling cost.

4. Supervisor's salary, factory  - Fixed and Indirect manufacturing cost.

5. Depreciation, executive autos. - Fixed and administrative cost.

6. Wages of workers assembling computers  - Variable and direct manufacturing cost.

7. Insurance, finished goods warehouses - Fixed and Selling cost.

8. Lubricants for production equipment.  - Variable and indirect manufacturing cost.

9. Advertising costs  - Fixed and Selling cost.

10. Microchips used in producing calculators. - Variable and direct manufacturing cost.

11 Shipping costs on merchandise sold  - Variable and Selling cost.

12. Magazine subscriptions, factory lunchroom - Fixed and administrative cost.

Explanation:

The cost which is affected by the production of units is known as variable cost. The cost which does not vary with the units produced is fixed cost.

The costs which are related to selling and storage of the finished goods is selling cost.

The cost which is not affected by units produced and is related to office premises and controlling an organization is administrative cost.

The cost which is associated with the production of units and is incurred to convert raw material into finished goods is manufacturing cost.

The manufacturing cost which is directly affected by the units produced is direct cost and the manufacturing cost which is not affected by the units produced is indirect cost .