Question

Classify Costs

Following is a list of various costs incurred in producing replacement automobile parts. With respect to the production and sale of these auto parts, classify each cost as either variable costs, fixed costs, or mixed costs.

1. Oil used in manufacturing equipment
2. Plastic
3. Property taxes, $165,000 per year on factory building and equipment
4. Salary of plant manager
5. Cost of labor for hourly workers
6. Packaging
7. Factory cleaning costs, $6,000 per month
8. Metal
9. Rent on warehouse, $10,000 per month plus $25 per square foot of storage used
10. Property insurance premiums, $3,600 per month plus $0.01 for each dollar of property over $1,200,000
11. Straight-line depreciation on the production equipment
12. Hourly wages of machine operators
13. Electricity costs, $0.20 per kilowatt-hour
14. Computer chip (purchased from a vendor)
15. Pension cost, $1.00 per employee hour on the job

Answer 1

1. Oil used in manufacturing equipment	Variable
2. Plastic	Variable
3. Property taxes, $165,000 per year on factory building and equipment	Fixed
4. Salary of plant manager	Fixed
5. Cost of labor for hourly workers	Variable
6. Packaging	Variable
7. Factory cleaning costs, $6,000 per month	Fixed
8. Metal	Variable
9. Rent on warehouse, $10,000 per month plus $25 per square foot of storage used	Mixed
10. Property insurance premiums, $3,600 per month plus $0.01 for each dollar of property over $1,200,000	Mixed
11. Straight-line depreciation on the production equipment	Fixed
12. Hourly wages of machine operators	Variable
13. Electricity costs, $0.20 per kilowatt-hour	Variable
14. Computer chip (purchased from a vendor)	Variable
15. Pension cost, $1.00 per employee hour on the job	Variable