Problem 342 Identifying Variable Costs Committed Fixed Costs

Problem 3-42 Identifying Variable Costs, Committed Fixed Costs, and Discretionary Fixed Costs

OBJECTIVE 1

Required:

Classify each of the following costs for a jeans manufacturing company as a variable cost, committed fixed cost, or discretionary fixed cost.

a.The cost of buttons

b.The cost to lease warehouse space for completed jeans—the lease contract runs for 2 years at $5,000 per year

c.The salary of a summer intern

d.The cost of landscaping and mowing the grass—the contract with a local mowing company runs from month to month

e.Advertising in a national magazine for teenage girls

f.Electricity to run the sewing machines

g.Oil and spare needles for the sewing machines

h.Quality training for employees—typically given for four hours at a time, every six months

i.Food and beverages for the company Fourth of July picnic

j.Natural gas to heat the factory during the winter

a.The cost of buttons - Variable Costs

b.The cost to lease warehouse space for completed jeans—the lease contract runs for 2 years at $5,000 per year - Committed Fixed Costs

c.The salary of a summer intern - Discretionary Fixed Costs

d.The cost of landscaping and mowing the grass—the contract with a local mowing company runs from month to month - Discretionary Fixed Costs

e.Advertising in a national magazine for teenage girls - Discretionary Fixed Costs

f.Electricity to run the sewing machines - Variable Costs

g.Oil and spare needles for the sewing machines - Variable Costs

h.Quality training for employees—typically given for four hours at a time, every six months - Discretionary Fixed Costs

i.Food and beverages for the company Fourth of July picnic - Discretionary Fixed Costs

j.Natural gas to heat the factory during the winter - Variable Costs