Exercise 115 Classification of Costs as Variable or Fixed an

Exercise 1-15 Classification of Costs as Variable or Fixed and as Product or Period [LO1-3, LO1-4]

Classify each cost as being either variable or fixed with respect to the number of units produced and sold. Also classify each cost as either a selling and administrative cost or a product cost.

  

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Classify each cost as being either variable or fixed with respect to the number of units produced and sold. Also classify each cost as either a selling and administrative cost or a product cost.    Cost Item Cost Behavior Period (Selling and Administrative) Cost/Product Cost 1. Hamburger buns in a Wendy’s outlet. 2. Advertising by a dental office. 3. Apples processed and canned by Del Monte. 4. Shipping canned apples from a Del Monte plant to customers. 5. Insurance on a Bausch & Lomb factory producing contact lenses. 6. Insurance on IBM’s corporate headquarters. 7. Salary of a supervisor overseeing production of printers at Hewlett-Packard. 8. Commissions paid to automobile salespersons. 9. Depreciation of factory lunchroom facilities at a General Electric plant. 10. Steering wheels installed in BMWs. +

Solution

1 Hamburger buns in a Wendy’s outlet. Variable Product cost 2 Advertising by a dental office. Fixed Selling and administrative cost 3 Apples processed and canned by Del Monte. Variable Product cost 4 Shipping canned apples from a Del Monte plant to customers. Variable Selling and administrative cost 5 Insurance on a Bausch & Lomb factory producing contact lenses. Fixed Product cost 6 Insurance on IBM’s corporate headquarters. Fixed Selling and administrative cost 7 Salary of a supervisor overseeing production of printers at Hewlett-Packard. Fixed Product cost 8 Commissions paid to automobile salespersons. Variable Selling and administrative cost 9 Depreciation of factory lunchroom facilities at a General Electric plant. Fixed Product cost 10 Steering wheels installed in BMWs. Variable Product cost