Question: Big Box Entertainment BBE operates a large store in Denver

Big Box Entertainment (BBE) operates a large store in Denver, Colorado. The store has both a movie (DVD) section and a music (CD) section. BBE reports revenues for the movie section separately from the music section. Classify each cost item (A– H) as follows:
a. Direct or indirect (D or I) costs of the total number of DVDs sold.
b. Variable or fixed (V or F) costs of how the total costs of the movie section change as the total number of DVDs sold changes. (If in doubt, select on the basis of whether the total costs will change substantially if there is a large change in the total number of DVDs sold.)
You will have two answers (D or I; V or F) for each of the following items:

Cost Item D or I V or F
A. Annual retainer paid to a DVD distributor
B. Electricity costs of the BBE store (single bill covers entire store)
C. Costs of DVDs purchased for sale to customers
D. Subscription to DVD Trends magazine
E. Leasing of computer software used for financial budgeting at the BBE store
F. Cost of popcorn provided free to all customers of the BBE store
G. Earthquake insurance policy for the BBE store
H. Freight- in costs of DVDs purchased by BBE

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  • CreatedJanuary 15, 2015
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