Question

Required information (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 $495 each. Costs 1. Plastic for casing-$16,000 2. Wages of assembly workers-$89,000 3. Property taxes on factory-$4,000 4. Accounting staff salaries-$40,000 5. Drum stands (1,000 stands purchased)-$36,000 6. Rent cost of equipment for sales staff-$36,000 7. Upper management salaries-$170,000 8. Annual flat fee for factory maintenance service-$21,000 9. Sales commissions-$13 per unit 10. Machinery depreciation, straight-line-$42,000 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 16,000 Cost by Function Product Period 16,000 $ 1. Plastic for casing 2. Wages of assembly workers 3. Property taxes on factory 4. Accounting staff salaries 5. Drum stands 6. Rent cost of equipment for sales staff 7. Upper management salaries 8. Annual flat fee for factory maintenance service 9. Sales commissions 10. Machinery depreciation, straight-line < Prev 1 2 of 5 !!! Next >

Answer 1

The table will be prepared in the following manner:

	Cost by behavior		Cost by function
	Variable	Fixed	Product	Period
Plastic for casing	$      16,000		$      16,000
Wages of assembly workers	$      89,000		$      89,000
Property taxes on factory		$         4,000	$         4,000
Accounting staff salaries		$      40,000		$      40,000
Drum stands	$      36,000		$      36,000
Rent cost of equipment for sales staff		$      36,000		$      36,000
Upper management. salaries		$   1,70,000		$   1,70,000
Annual flat fee paid for maintenance service		$      21,000	$      21,000
Sales commissions	$      13,000			$      13,000
Machinery depreciation, straight-line		$      42,000	$      42,000
Total	$   1,54,000	$   3,13,000	$   2,08,000	$   2,59,000

Notes

Sales commission calculated as no. of units sold * sales commission per unit

Variable costs are those costs which change or vary with the level of production.

Fixed costs remain fixed or constant irrespective of production levels.

Product costs are costs which can be directly attributed to the production of goods.

Period costs are costs which the company will incur in a particular period and are not traceable to particular products.