Question

The following data is available for Crater Corporation's North American division for the years 2014 and 2015. During these years there were no inventories in the system. 2015 2014 Production quantity Number of customers Revenues 60,000 12,600 $24,800,000 $26,240,000 56,000 13,500 enses Direct materials & components Direct production wages (1) Production supervisory salaries Salaries paid to sales representatives (2) Advertising Insurance (3) Building rent (4) Other salaries (5) Honorarium to the members of the board Production quality control (6) Market research Depreciation (7) Facilities management (8) $ 3,224,000 $ 3,557,200 $ 1,467,200 $ 1,609,800 $269,400 $ 246,100 $622,000 $ 643,600 $688,100 $ 581,200 $ 122,070 $ 117,000 $266,640 $ 264,800 $ 1,176,000 $ 1,248,000 $438,200 $ 438,200 $ 133,050 $ 138,270 $348,120 $ 305,080 $ 1,329,900 $ 1,172,100 $885,830 $ 747,800 $690,400 $ 623,000 $198,100 $ 195,800 $ 860,600 $ 770,700 $368,340 $ 309,500 $920,600 $ 927,800 Personnel department Utilities-production (9) Utilities-other (10) Customer service (11) $14,008,550 $13,895,950 Note: 1. Paid on the basis of production quantity 2. Ten representatives @ $25.000 per person + 1.5% of sales revenue 3. Manufacturing-70%, remaining-general liability 4, Manufacturing-70%; Marketing-10%; remaining for Administration 5. Manufacturing-40%; Marketing-25%; remaining for Administration 6. Variable-30% 7. Manufacturing-70%, Sales & Marketing-20%; remaining for Adminsitration (all straight line) 8, Factory maintenance-40%; General maintenance-60% 9. Fixed-30% 10, Equally divided between Sales & Marketing and Administration; variable-35% 11. Variable-1096

Answer 1

1) Classification of expense by behavior and by function:

Fixed Costs: A periodic cost that remains more or less unchanged irrespective of the output level or sales revenue, such as depreciation, insurance, interest, rent, salaries, and wages.

Variable costs are those costs that vary depending on a company's production volume; they rise as production increases and fall as production decreases.

	Behavior		Function
	Variable	Fixed	MFG	Sales/MKT	Admin
Direct Materials and components	$        3,224,000		$        3,224,000
Direct production wages	$        1,467,200		$        1,467,200
Production supervisory salaries		$            269,400	$            269,400
Salaries paid to sale representatives	$            372,000	$            250,000		$        622,000
Advertising		$            688,100		$        688,100
Insurance		$            122,070	$              85,449		$          36,621
Building Rent		$            266,640	$            186,648	$          26,664	$          53,328
Other Salaries		$        1,176,000	$            470,400	$        294,000	$        411,600
Honorarium to the member of Board		$            438,200			$        438,200
Production quality control	$              39,915	$              93,135	$            133,050
Market research		$            348,120		$        348,120
Depreciation		$        1,329,900	$            930,930	$        265,980	$        132,990
Facilities Management		$            885,830	$            354,332		$        531,498
Legal		$            690,400			$        690,400
Personnel development		$            198,100			$        198,100
Utilities - Production	$            602,420	$            258,180	$            860,600
Utilities - Other	$            128,919	$            239,421	$            122,780	$        122,780	$        122,780
Customer Services	$              92,060	$            828,540		$        920,600