Question

1. Complete the answer sheet below by placing an "X" under each heading that identifies the cost involved. You should have two "Xs" for each cost (each row) - one identifying Cost Behavior (Variable or Fixed) and one indicating either Direct Materials, Direct Labor, Manufacturing Overhead, OR Pe- riod Cost. (5 Points) Period Cost Мапufactur- ing Over- head (Selling or Administra- Variable Direct Direct Materials Labor tive) Cost Fixed Cost Materials costs traceable to cost objects Production Super- visor's Salary Production line workers' wages Factory Building depreciation Advertising costs -1 -

Answer 1

1)

	Variable cost	fixed cost	direct material	direct labor	manufacturing overhead	period cost
Direct materials costs traceable to cost objects	X		X
Production supervisor salary		X			X
Production line workers wages	X			X
Factory building depreciation		X			X
Advertising cost		X				X

Explanation :

Direct material cost traceable to cost objects -

direct material cost is always variable because each object produced requires direct materials and it is directly proportional to the number of objects produced.

As name specifies direct material cost is classified under direct material.

Production supervisor salary -

Generally salary given to supervisor is fixed because salary is fixed amount given for a specified period like a month or week. As supervisor is not direct labor his remuneration can't be variable with number of objects produced.

As it is fixed amount it can't be classified under direct material or direct labor cost and as production supervisor works in factory it comes under manufacturing overhead.

Production line workers wages -

Production wages always varies directly with number of objects produced. Wages are paid on the basis of number of units produced. So it is variable cost.

Product wages are direct labor cost as it is paid to labors in the factory.

Factory building depreciation -

The declaration depreciation amount can't change with the number of units produced, it is written off periodically even if no production takes place.

As it is factory related depreciation it comes under manufacturing overhead cost. Any expense incurred in the factory other than direct labor and material comes under manufacturing overhead.

Advertising cost.-

Generally the advertising amount is not paid on the basis of number of units produced /sold. A fixed amount is given to advertising media to advertise the product for a specified period. As a result it is fixed cost and period cost.