Section #1 Required

Mary needs to classify the various costs. In order to manage these costs, she wants them identified using the information below.

1. Behavior (fixed or variable)
2. Traceability (direct or indirect)
3. Financial reporting (product or period)
4. If product cost, identify which items are direct materials (DM), direct labor (DL), or manufacturing overhead (MOH)

Section #1 - Cost Classification Mary's first action plan was to list all the key products or items that she would need to start the business. Her list included a conventional oven, a computerized cash system, baking pans, business licenses, health inspections, flour, sugar, baking soda, raisins, butter, eggs and rum. She also planned on hiring her accounting professor on a part-time basis to perform bookkeeping services and her nieces Brianna and Alexis, to help her in the bakery. Aunt Spicer will supervise the nieces. Mary's Batter Inc. cost drivers are provided in the table below: TABLE 1: COST INFORMATION Standard units/cake Item and Ingredients Conventional oven n/a Cost $6,000 (depreciated over 5 years, using straight-line depreciation; no salvage value) $0 - provided by the landlord $0 - provided by dad $24 per 8 pound bag $2 per dozen $15 per 25 pound bag $6 per 14 pound box $6.50 per 4 pounds $8 per 2 pounds Refrigerator Baking pans & Licenses Baking flour Eggs Sugar Baking Soda Butter Raspberries Others (lemons juice, diced walnuts, nutmeg, confectioner sugar) Computerized cash system 1 bag 4 eggs 1 pound 1 pound 122 pound $30 for all four containers per month $12 per month (rental for 2 years) $12 per bottle 14 of the bottle Rum (alcohol) Utilities includes gas, electric, water) Mobile phone (business) Salary -Mary Salary - niece Salary - Aunt Accountant Estimated Monthly Overhead (MOH) $50 per month $50 per month $500 per month $8 per hour $100 per month $100 per month 1 niece for 1.5 hours per cake $4 per cake Use the Table below to complete this section. Place an X in the appropriate boxes. TABLE 2: COST CLASSIFICATION CHART FIXED VARIABLE DIRECT INDIRECT PRODUCT DM DLMOH PERIOD Oven Cash system Baking pans Business license Health Inspections Rent | Utilities Mobile phone Flour Sugar Baking soda Butter Raspberries Eggs Rum Other Materials Accountant Brianna Alexis Mary Aunt Spicer