PROBLEM 1–15A Cost Classification [ LO6 , LO7 ]

Various costs associated with the operation of factories are given below:

1. Electricity to run production equipment.

2. Rent on a factory building.

3. Cloth used to make drapes.

4. Production superintendent’s salary.

5. Wages of laborers assembling a product.

6. Depreciation of air purification equipment used to make furniture.

7. Janitorial salaries.

8. Peaches used in canning fruit.

9. Lubricants for production equipment.

10. Sugar used in soft-drink production.

11. Property taxes on the factory.

12. Wages of workers painting a product.

13. Depreciation on cafeteria equipment.

14. Insurance on a building used in producing helicopters.

15. Cost of rotor blades used in producing helicopters.

Required:

Classify each cost as either variable or fixed with respect to the number of units produced and sold. Also indicate whether each cost would typically be treated as a direct cost or an indirect cost with respect to units of product. Prepare your answer sheet as shown below:

Cost Item Example: Factory insurance Cost Behavior Variable Fixed To Units of Product Direct Indirect X