Montana Jeans Inc. manufactures blue jeans for distribution to several major retail chains. The following costs are
Question:
The following costs are incurred in the production and sale of blue jeans:
a. Brass buttons
b. Janitorial supplies, $1,000 per month
c. Legal fees paid to attorneys in defense of the company in a patent infringement suit,
$30,000 plus $150 per hour
d. Straight-line depreciation on sewing machines
e. Salary of production vice president
f. Leather for patches identifying each jean style
g. Salary of designers
h. Supplies
i. Denim fabric
j. Insurance premiums on property, plant, and equipment, $20,000 per year plus $2 per $10,000 of insured value over $7,000,000
k. Hourly wages of machine operators
l. Property taxes on property, plant, and equipment
m. Salesperson’s salary, $15,000 plus 2% of the total sales
n. Rental costs of warehouse, $3,000 per month plus $2 per square foot of storage used
o. Electricity costs of $0.12 per kilowatt hour
p. Rent on experimental equipment, $30,000 per year
q. Thread
r. Blue dye
s. Shipping boxes used to ship orders
t. Consulting fee of $70,000 paid to industry specialist for marketing advice
Instructions
Classify the preceding costs as either fixed, variable, or mixed. Use the following tabular headings and place an “X” in the appropriate column. Identify each cost by letter in the cost column.
Cost Fixed Cost Variable Cost Mixed Cost
Distribution
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Related Book For
Accounting
ISBN: 978-0324401844
22nd Edition
Authors: Carl S. Warren, James M. Reeve, Jonathan E. Duchac
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