Question

Required: Using the table below as a reference, describe whether the following costs incurred in a manufacturing company are (a) fixed or variable and (b) product costs or period costs. The first cost item is presented in the table as an example. Cost Item Fixed Variable Product Period 0 Annual audit and tax return fees X X 1 Costs (other than food) of running the cafeteria for factory personnel 2 Direct materials used 3 Clerical staff in administrative offices 4 Depreciation of factory machinery* 5 Property taxes on the factory 6 Insurance premiums on delivery vans 7 Factory custodian pay 8 Sales commissions 9 Rent paid for corporate jet 10 Transportation-in costs for indirect material *Straight-line depreciation method used.

Answer 1

1.Costs (other than food) of running the cafeteria for factory personnel -A/Fixed cost and B/Product Cost

2 Direct materials used A/ Variable cost and B/Product cost

3. Clerical staff in administrative offices A/ Fixed Cost and B/Period costs

4 Depreciation of factory machinery A/ Fixed cost and B/Product costs

5.Property taxes on the factory A/ Fixed cost and B/Period costs,

6.Insurance premiums on delivery vans A/ Fixed costs and B/Period costs,

7.Factory custodian pay A/ Fixed cost and B/Period cost,

8.Sales commissions A/ Variable cost and B/Product cost

9 Rent paid for corporate jet  A/ Fixed cost and B/Period cost,

10 Transportation-in costs for indirect material A/ Fixed cost and B/Period cost,