Question

Classification of costs, merchandising sector. Band Box Entertainment (BBE) operates a large store in Atlanta, Georgia. The store has both a movie (DVD) section and a music (CD) section. BBE reports revenues for the movie section separately from the music section. Classify each cost item as follows:Direct or indirect (D or I) costs of the total number of DVDs sold.Variable or fixed (V or F) costs of how the total costs of the movie section change as the total number of DVDs sold changes. (If in doubt, select on the basis of whether the total costs will change substantially if there is a large change in the total number of DVDs sold.) You will have two answers (D or I; V or F) for each of the following items:A. Annual retainer paid to a DVD distributor B. Cost of store manager’s salary C. Costs of DVDs purchased for sale to customers (Easily traceable and helps identify what DVDs to stock) D. Subscription to DVD Trends magazine E. Leasing of computer software used for financial budgeting at the BBE store F. Cost of popcorn provided free to all customers of the BBE store G. Cost of cleaning the store every night after closing H. Freight-in costs of DVDs purchased by BBE

Answer 1

Answer:

(A) Annual retainer paid to a DVD distributor ( Direct and Fixed Cost)

(B) Cost of store manager’s salary (Indirect and Fixed Costs)

(C) Costs of DVDs purchased for sale to customers (Easily traceable and helps identify what DVDs to stock) - Direct and Variable costs.

(D) Subscription to DVD Trends magazine ( Indirect and Fixed costs)

(E)  Leasing of computer software used for financial budgeting at the BBE store ( Indirect and Fixed Cost)

(F) Cost of popcorn provided free to all customers of the BBE store (Indirect and Variable costs)

(G) Cost of cleaning the store every night after closing (Indirect and Fixed costs)

(H) Freight-in costs of DVDs purchased by BBE (Direct and variable costs)

Explanation: