P2–8 Cost classification Time allowed: 20 minutes Various costs associated with the operation of a factory are given below:

1 Electricity used in operating machines 2 Rent on a factory building 3 Cloth used in drapery production 4 Production superintendent’s salary 5 Cost of labourers assembling a product 6 Depreciation of air purification equipment used in furniture production 7 Caretaker salaries 8 Peaches used in canning fruit 9 Lubricants needed for machines 10 Sugar used in soft-drink production 11 Property taxes on the factory 12 Cost of workers painting a product 13 Depreciation on cafeteria equipment 14 Insurance on a building used in producing TV sets 15 Picture tubes used in TV sets.
Required Classify each cost as being either variable or fixed with respect to the number of units produced and sold. Also indicate whether each cost would typically be treated as a direct cost or an indirect cost with respect to units of product. Prepare your answer sheet as shown below:

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Cost Item Example: Factory insurance Cost behaviour Variable To units of product Indirect Fixed Direct X