Question

QUESTION 2 (16 MARKS) Cost Descriptions A. A number of cost and measures of activity are listed below. 1 Fised/Variable 2 Cost of heating a hardware store Possible Measure of Activity RM Number of 3 4 assembled P CORE Bags shippe 5 Windsheild wiper blades installed on at an auto assembly plant Cost of tomato sauce used at a na shoo Cost of shipping bags of fertilizer to s customer at a chemical plant Cost of electricity for production equipment at the shoe manufacturer Cost of renting production equipment on monthly basis at a shoe manufaturer Cost of vaccinc used at a clinic Shoes produced 0 Shoes produced 7 8 Cost of sales of hardware store 9 Receptionist's wages at dentist's office 10 Salary of production manager at a snowboard manufacturer Vaccines administered Sales in RM Number of patients Snowboards produced Required: For each item above, indicate whether the cost is MAINLY fixed or variable with respect to the possible measure of activity listed. Put your answers in the column provided (5 marks) A number of cost are listed below: B. ANSWER Cost Objects A particular personal computer A particular residential area 1 The outpatient clinic 3 Cost Descriptions Supervisor's wages in a computer manufacturing facility Salary of president of a residential construction company Cost of tongue depressors used in an outpatient clinic at a hospital Cost lubricant oil used at the auto repair shop of an automobile dealer Manager's salary at anhotel run by a chain of hotels Cost of screws used to secure wood trim in a yacht manufacturer Accounting professor's salary The auto repair shop 4 A particular hotel 5 6 A particular yacht 7 The Accounting Department Page 5 of 8

Answer 1

Answer to Q#(C) (First question in the list): a) Product costs are those costs which are incurred at the factory level during production process which may be direct or indirect costs. Of which, variable product costs will change when production volume increases or decreases whereas fixed product costs do not change, unless there are some conditions that have the capability to decrease or cause to increase the same. Direct materials Utilities, factory Indirect labor Depreciation of production equipment Direct labor Total product costs RM 107,000 Variable direct costs 11,000 Variable indirect costs 29,000 Variable indirect costs 46,000 Fixed indirect costs 109,000 Variable direct costs 302,000

b) Period costs are those costs which are incurred outside the factory but for carrying out firm's selling and administrative related operating activities and financing activities. Of which, variable period costs will change when sales volume increases or decreases whereas fixed period costs do not change, unless there is any particular condition that has the capability to decrease and cause to increase the same. Sales commissions Administrative salaries Advertising Depreciation of administrative equip. Director's remuneration Total period costs RM 35,000 Variable period costs 115,000 Fixed period costs 148,000 Mixed period costs, in general 39,000 Fixed period costs 140,000 Fixed period costs 477,000