# EXERCISE 1-17 Classifying Variable and Fixed Costs and Product and Period Costs L01-3, 101-4 Below are...

EXERCISE 1-17 Classifying Variable and Fixed Costs and Product and Period Costs L01-3, 101-4 Below are listed various costs that are found in organizations. 1. Hamburger buns in a Wendy's restaurant. 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 Nucor's corporate headquarters. 7. Salary of a supervisor overseeing production of printers at Ricoh. 8. Commissions paid to automobile salespersons. 9. Depreciation of factory lunchroom facilities at a General Electric plant. 10. Steering wheels installed in Tesla electric vehicles. Required: Using the table shown below, describe each of the costs mentioned above in two ways. In terms of cost classifications for predicting cost behavior (column 1), indicate whether the cost is fixed or variable with respect to the number of units produced and sold. With respect to cost classifications for preparing financial statements (column 2), indicate whether the item is a product cost or period cost (selling and administrative cost). Cost Classifications for: (1) (2) Predicting Preparing Cost Item Cost Behavior Financial Statements
Strange Systems uses the following data in its Cost-Volume-Profit analyses: Total Sales \$380,000 Variable expenses 228,000 Contribution margin 152,000 Fixed expenses 116,000 \$36,000 Net operating income What is total contribution margin if sales volume increases by 20%?

**Variable Costs: Variable costs are those cost that are incurred by the firm as a result of the use of variable factor inputs. They are dependent of the level of input.

**Fixed Costs: Fixed costs are those cost that are incurred as a result of the use of fixed factor inputs, It remains fixed at any level of output in the short run.

**Product Costs: DIrect Materials + Direct Labors + Direct Expenses + Manufacturing Overhead.

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