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

operates a large store in Halifax. The store has both a DVD section and a musical section

(compact discs, mp3 players, etc.). HEC reports revenues for the DVD section separately from the musical section.

REQUIRED Classify each of the following cost items as

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

b. Variable or fixed (V or F) costs with respect to how the total costs of the DVD section change as the number of DVDs sold changes. (If in doubt, select the cost type based on whether the total costs will change substantially if a large number of DVDs are sold.) You will have two answers (D or I; V or F) for each of the following items:LO1

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Cost Item A. Annual retainer paid to a DVD distributor B. Electricity costs of HEC store (single bill covers entire store) C. Costs of DVDs purchased for sale to customers D. Subscription to DVD Trends 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 of DVDs purchased by HEC D or I V or F