E$4-1$ Classifying Fixed and Variable Costs

L$01$

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Question:

Classify each of the following items of factory overhead as either a fixed or a variable cost. $($Include any costs that you consider to be semivariable within the variable category. Remember that variable costs change in total as the volume of production changes.$)$

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a$.$ Indirect labor

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b$.$ Indirect materials

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c$.$ Insurance on building

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d$.$ Overtime premium pay

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e$.$ Depreciation of building $($straight$-$line method$)$

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f$.$ Polishing compounds

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g$.$ Depreciation of machinery $($units$-$of$-$production method$)$

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h$.$ Employer$$s payroll taxes

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i$.$ Property taxes

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j$.$ Machine lubricants

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k$.$ Employees$$ hospital insurance $($paid by employer$)$

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l$.$ Labor for machine repairs

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m$.$ Vacation pay

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n$.$ Janitor$$s wages

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o$.$ Rent

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p$.$ small tools

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q$.$ Plant manager$$s salary

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r$.$ Factory electricity

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s$.$ Product inspector$$s wages

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Answer:

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$$Serial No$.$

Expense

Fixed $/$ Semi Variable $/$ Variable

a

Indirect Labor

Variable Cost

b

Indirect Materials

Variable Cost

c

Insurance on Building

Fixed Cost

d

Overtime Premium Pay

Variable Cost

e

Depreciation of Building $($Straight$-$line$)$

Fixed Cost

f

Polishing Compounds

Variable cost

g

Depreciation of Machinery $($Unit$-$of$-$production$)$

Variable Cost

h

Employers' Payroll Tax

Variable Cost

i

Property Taxes

Fixed Cost

j

Machine Lubricants

Variable Cost

k

Employees' Hospital Insurance

$($Paid by Employer$)$

Fixed Cost

l

Labor for Machine Repairs

Variable Cost

m

Vacation Pay

Fixed Cost

n

Janitor's Wages

Fixed Cost

o

Rent

Fixed Cost

p

Small Tools

Variable Cost

q

Plant Manager's Salary

Fixed Cost

r

Factory Electricity

Variable Cost

s

Product Inspector's Wages

Variable Cost