Exercise 3-20    Variable and Fixed Costs

What follows are a number of resources that are used by a manufacturer of futons. Assume that the output measure or cost driver is the number of futons produced. All direct labor is paid on an hourly basis, and hours worked can be easily changed by management. All other factory workers are salaried.

a.       Power to operate a drill (to drill holes in the wooden frames of the futons)

b.       Cloth to cover the futon mattress

c.        Salary of the factory receptionist

d.       Cost of food and decorations for the annual Fourth of July party for all factory employees

e.        Fuel for a forklift used to move materials in a factory

f.        Depreciation on the factory

g.        Depreciation on a forklift used to move partially completed goods

h.       Wages paid to workers who assemble the futon frame

i.         Wages paid to workers who maintain the factory equipment

j.         Cloth rags used to wipe the excess stain off the wooden frames

 

Required:

Classify the resource costs as variable or fixed.