Classification of Costs
Speedy Auto Service provides oil changes, tire repair/replacement, and minor repairs from 12 different locations in Wadesborough, Pennsylvania. The technicians who replace the oil and parts (mostly windshield wipers, air filters, and the like) are paid for an eight-hour day, irrespective of the number of customers in a given day. The cost object for Speedy is each customer visit. The cost elements for Speedy include:
1. Technicians who change the oil and replace parts
2. Parts
3. Purchase of oil and tires
4. Supplies, rags, cleanup equipment
5. Tools
6. Rental of each location
7. Advertising
8. Utilities
9. Licenses and fees
10. Employee training; 10 hours at time of hiring and 2 hours per month thereafter
11. Security service to watch the locations during closing hours
12. Online software system for managing sales, costs, and financial reports, including tax returns and employee payroll
13. Disposal of waste oil and used tires
Required
1. For each cost item, indicate whether it is fixed or variable relative to the cost object.
2. For each cost item, indicate whether it is a product or a period cost.
3. Which of the above costs could have potentially harmful environmental effects, and why?
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