Question

Listed here are the total costs associated with the production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $578 each.
  

	Costs
1.	Plastic for casing—$16,000
2.	Wages of assembly workers—$85,000
3.	Property taxes on factory—$4,000
4.	Accounting staff salaries—$42,000
5.	Drum stands (1,000 stands purchased)—$38,000
6.	Rent cost of equipment for sales staff—$48,000
7.	Upper management salaries—$220,000
8.	Annual flat fee for factory maintenance service—$15,000
9.	Sales commissions—$22 per unit
10.	Machinery depreciation, straight-line—$45,000

Required:
1. Classify each cost and its amount as (a) either variable or fixed and (b) either product or period. (The first cost is completed as an example.)

  

Answer 1

1.

		Cost by behavior		Cost by function
	Costs	Variable	Fixed	Product	Period
1	Plastic for casing	16,000		16,000
2	Wages of assembly workers	85,000		85,000
3	Property taxes on factory		4,000	4,000
4	Accounting staff salaries		42,000		42,000
5	Drum stands	38,000		38,000
6	Rent cost of equipment for sales staff		48,000		48,000
7	Upper management salaries		220,000		220,000
8	Annual flat fee for factory maintenance service		15,000	15,000
9	Sales commission (1,000 x 22)	22,000			22,000
10	Machinery depreciation, straight line		45,000	45,000