Chloe Corp. is a diversified firm with numerous plants. The plant in Columbus, Indiana currently makes three products: (1) regular farm toys; (2) deluxe farm toys; and, (3) miniature cars. Management of Chloe Corp. is considering the following three decisions related to its Columbus plant.
Decision 1: Whether to continue producing a deluxe version of the farm toys? The deluxe version uses the same machines as used by the regular models, but it has additional finishing and accessories.
Decision 2: Whether to continue making farm toys? The firm will dispose of the machines used for this product line if the firm discontinues the line. Most of the machines used for making farm toys are unique to the line but some of the die-casting machines are also used to stamp out miniature cars.
Decision 3: Whether to close the Columbus plant?
Required:
Classify the following costs with respect to their traceability for the three decisions listed. That is, for each cost, indicate whether it is direct (D) or indirect (I) with respect to each decision (i.e., you should have 21 classifications)
1. Cost of special die used to make the deluxe version of farm toys. Each die can make enough toys to meet a year's demand.
2. Labor used to make the deluxe farm toy.
3. Cost of dedicated machines used to make farm toys.
4. Engineering support provided solely to maintain the farm toy line.
5. Advertising for farm toys.
6. Salary paid to the manager of the Columbus plant.
7. IT support provided by the head office to the Columbus plant.