Classification of costs, merchandising sector. Home Entertainment Centre (HEC) oper¬

ates a large store in Halifax. The store has both a video section and a musical section (com¬

pact discs, records, and tapes). HEC reports revenues for the video section separately from the musical section.

Required Classify each ofthe following cost items as

a. Direct or indirect (D or I) costs with respect to the video section.

b. Variable or fixed (V or F) costs with respect to how the total costs of the video section change as the number of videos sold changes. (If in doubt, select the cost type based on whether the total costs will change substantially if a large number ofvideos are sold.)

You will have two answers (D or I; V or F) for each ofthe following items:

Cost Item D or I V or F A. Annual retainer paid to a video distributor B. Electricity costs ofHEC store (single bill covers entire store)

C. Costs ofvideos purchased for sale to customers D. Subscription to Video Trejids magazine E. Leasing of computer software used for financial budgeting at HEC store F. Cost of popcorn provided free to all HEC customers G. Fire insurance policy for HEC store H. Freight-in costs ofvideos purchased by HEC