We can now apply the theory of classification in a practical way by taking examples of costs and classifying them in the way we have discussed so far. Analyse the costs listed below of an engineering factory under the following six headings:

(i) Direct materials

(ii) Direct labour

(iii) Indirect costs

(iv) Administration expenses

(v) Selling and distribution expenses

(vi) Finance expenses Costs

(a) Wages of men maintaining productive machinery

(b) Wages of men maintaining accounting machinery

(c) Loss of canteen run exclusively for factory workers

(d) Loss of canteen run exclusively for administration workers

(e) Grease used on productive machinery

(f) Cost of raw materials

(g) Carriage inwards on fuel used in factory boiler house

(h) Carriage inwards on raw materials

(i) Wages of cleaner in factory

(j) Wages of managing director’s chauffeur

(k) Discounts allowed

(l) Rent of sales rooms

(m) Wages of operators of productive machinery in factory

(n) Wages of security guards

(o) Debenture interest

(p) Rent of annexe used by accounting staff

(q) Managing director’s salary

(r) Salesmen’s salaries

(s) Running costs of salesmen’s cars

(t) Repairs to factory buildings

(u) Audit fees

(v) Power to run productive machinery in factory

(w) Rates: 75% for the factory and 25% for other buildings

(x) Rent of internal telephone system in factory

(y) Bank interest

(z) Cost of advertising products on television