Question

Required information Problem 14-1A Cost computation, classification, and analysis LO C2, C3 (The following information applies to the questions displayed below.) Listed here are the total costs associated with the production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $470 each. Costs 1. Plastic for casing-$15,000 2. Wages of assembly workers-$87,000 3. Property taxes on factory-$6,000 4. Accounting staff salaries-$39,000 5. Drum stands (1,000 stands purchased)-$ 38,000 6. Rent cost of equipment for sales staft-$12,000 7. Upper management salaries-$155,000 8. Annual flat fee for factory maintenance service-$21,0 9. Sales commissions-$24 per unit 10. Machinery depreciation, straight-line-$38,000 . De 1 Problem 14-1A Part 1 Required: 1. Classify each cost and its amount as (a) either variable or fixed and (b) either product or period. (The first cost is completed as an example.) Costs Cost by Behavior Variable Fixed $ 15,000 Cost by Function Product Period $ 15,000 1. Plastic for casing

Answer 1

Variable costs are the costs that change with the activity level

Fixed costs are the costs that do not change with the activity level

Product costs are related to the manufacturing process

Period costs are related to the selling and administrative expenses

Part 1

		Costs by Behavior	Cost by Function
	Costs	Variable	Fixed	Product	Period
1	Plastic for casing	15000		15000
2	Wages of assembly workers	87000		87000
3	Property taxes on factory		6000	6000
4	Accounting staff salaries		39000		39000
5	Drum stands	38000		38000
6	Rent cost of equipment for sales staff		12000		12000
7	Upper management salaries		155000		155000
8	Annual flat fee for factory maintenance service		21000	21000
9	Sales commissions	24000			24000
10	Machinery depreciation, straight-line		38000	38000

Sales commissions = $24 × 1,000 = $24,000

Part 2

TrueBeat Calculation of Manufacturing Cost per Drum Set
Item	Total cost	Per unit cost
Plastic for casing	15000	15
Wages of assembly workers	87000	87
Drum stands	38000	38
Total variable production costs	140000	140
Fixed Production costs
Property taxes on factory	6000	6
Annual flat fee for factory maintenance service	21000	21
Machinery depreciation	38000	38
Total fixed production costs	65000	65
Total production costs	$205000	$205