Indicate whether each of the following costs of productive output is usually (a) variable or (b) fixed:
Question:
Indicate whether each of the following costs of productive output is usually (a) variable or (b) fixed:
1. Packing materials for stereo components
2. Real estate taxes
3. Gasoline for a delivery truck
4. Property insurance
5. Depreciation expense of buildings (calculated with the straight-line method)
6. Supplies
7. Indirect materials
8. Bottles used to package liquids
9. License fees for company cars
10. Wiring used in radios
11. Machine helper’s wages
12. Wood used in bookcases
13. City operating license
14. Machine depreciation based on machine hours used
15. Machine operator’s hourly wages
16. cost of required outside inspection of each unit produced
Step by Step Answer:
1 a 2 b 3 a 4 b 5 b 6 a 7 a 8 a 9 b per car and a with size of fleet 10 a ...View the full answer
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In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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