Question

Choose teh correct classification:

		Product DM, DL, FOH	Period Selling /G&Adm	Direct or Indirect	Variable or Fixed
1.	Depreciation on salespersons’ cars
2.	Rent on equipment used in teh factory
3.	Lubricants (purchased in 5kg packaging) used for machine maintenance
4.	Wages of people paid per hour who work in teh finished goods warehouse
5.	Soap and paper towels used by factory workers at teh end of a shift
6.	Factory supervisors’ salaries
7.	Heat, water, and power consumed in teh factory
8.	Materials used for boxing products for shipment overseas (units are not normally boxed)
9.	Advertising costs (80AUEper advertisement
10.	Employees’ compensation insurance for teh finance department

Fill in data based on teh cost classification

Enter: For product costs write: DM or DL or FOH

For Period Costs: S or G&A

Choose: DC fr direct costs or IC for indirect costs

VC or FC for variable or fixed costs

Answer 1

Product costs are such costs associated with the direct production of a product. Period costs are costs connected with selling and administrative expense of a business. Fixed costs will not vary in accordance with the change in level of output. Variable costs will vary in accordance with the change in level of output. Direct costs are costs directly forming part of the product. Indirect costs do not directly form part of the Product.

1. Depreciation on salespersons’ cars - It is a part of Selling Expense which will not vary in accordance with the change in production. Therefore, it is fixed cost.

2 . Rent on equipment used in teh factory - It is an indirect, fixed, factory overhead.

3 . Lubricants (purchased in 5kg packaging) used for machine maintenance - It is an indirect, variable, factory overhead.

4 . Wages of people paid per hour who work in teh finished goods warehouse - It is a selling Expense which is fixed in nature.

5 . Soap and paper towels used by factory workers at teh end of a shift - It a fixed cost, forming part of Factory Overhead which is an indirect cost.

6 . Factory supervisors’ salaries - It is an indirect cost which is fixed in nature, part of Factory Overhead.

7. Heat, water, and power consumed in teh factory - It is an indirect cost which is variable in nature, part of Factory Overhead.

8 . Materials used for boxing products for shipment overseas (units are not normally boxed) - It is a part of Selling Expense which is fixed in nature.

9 . Advertising costs (80AUEper advertisement - It is a fixed cost which may not vary in accordance with the change in production. It is a part of Selling Expense.

10. Employees’ compensation insurance for teh finance department - It is a fixed, general and administrative Expense