EXERCISE 1–10 Classification of Costs as Variable or Fixed and as Selling and Administrative or Product [ LO3 , LO6 ]

Below are listed various costs that are found in organizations.

1. Hamburger buns in a Wendy’s outlet.

2. Advertising by a dental office.

3. Apples processed and canned by Del Monte.

4. Shipping canned apples from a Del Monte plant to customers.

5. Insurance on a Bausch & Lomb factory producing contact lenses.

6. Insurance on IBM’s corporate headquarters.

7. Salary of a supervisor overseeing production of printers at Hewlett-Packard.

8. Commissions paid to Encyclopedia Britannica salespersons.

9. Depreciation of factory lunchroom facilities at a General Electric plant.

10. Steering wheels installed in BMWs.

Required:
Classify each cost as being either variable or fixed with respect to the number of units produced and sold. Also classify each cost as either a selling and administrative cost or a product cost. Prepare your answer sheet as shown below. Place an X in the appropriate columns to show the proper classification of each cost.

Cost Behavior Cost Item Variable Fixed Selling and Administrative Cost Product Cost