E 2. Indicate whether each of the following costs for a bicycle manufacturer is a product or a period cost, a variable or a fixed cost, a value-adding or a nonvalueadding cost, and, if it is a product cost, a direct or an indirect cost of the bicycle:

1. Depreciation on office computer 2. Labor to assemble bicycle 3. Labor to inspect bicycle 4. Internal auditor’s salary 5. Lubricant for wheels Comparison of Income Statement Formats

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Cost Classification Product or Variable or Example Bicycle tire Period Fixed Product Variable Value-Adding or Nonvalue-Adding Value-adding Direct or Indirect Direct