Listed below are a number of costs typically found in organizations.
1. Property taxes, factory
2. Boxes used for packaging detergent
3. Salespersons’ commissions
4. Supervisor’s salary, factory
5. Depreciation, executive cars
6. Workers assembling computers
7. Packing supplies for out-of-state shipments
8. Insurance, finished goods warehouses
9. Lubricants for machines
10. Advertising costs
11. ‘Chips’ used in producing calculators
12. Shipping costs on merchandise sold
13. Magazine subscriptions, factory lunchroom
14. Thread in a garment factory
15. Selling cost (sales office)
16. Executive life insurance
17. Ink used in textbook production
18. Fringe benefits, assembly-line workers
19. Yarn used in sweater production
20. Wages of receptionist, executive offices.

Required
Prepare an answer sheet with column headings as shown below. For each cost item, indicate whether it would be variable or fixed with respect to the number of units produced and sold; and then whether it would be a selling cost, an administrative expense, or a manufacturing cost. If it is a manufacturing cost, indicate whether it would typically be treated as a direct cost or an indirect cost with respect to units of product. Three sample answers are provided for illustration.

Transcribed Image Text:

Cost item Direct labour Executive salaries Factory rent Variable or fixed V F F Selling cost Administrative expense X Manufacturing (product) cost Direct Indirect X X