P2–10 Cost classification Time allowed: 25 minutes 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 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 Billing costs 16 Executive life insurance 17 Ink used in textbook production 18 Fringe benefits, assembly-line workers 19 Yarn used in sweater production 20 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 cost, 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.

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