EXERCISE 2–11 Classification of Costs as Variable or Fixed, and as Selling and Administrative or Product [LO2, LO5]

Below are listed various costs that are found in organizations:

1.       The costs of turn signal switches used at a General Motors plant. These are installed in the steering columns assembled at the plant.

2.       The salary of the manager in charge of production at BlackBerry.

3.       Salespeople’s commissions at Avon Products, a company that sells cosmetics door to door.

4.       Insurance on one of Bombardier’s factory buildings.

5.       The costs of shipping brass fittings from Graham Manufacturing’s plant in British Columbia to customers in California.

6.       Depreciation on the bookshelves at Reston Bookstore.

7.     The costs of X-ray film at the Toronto General Hospital’s radiology lab.

8.       The cost of leasing a toll-free telephone number at Staples Canada. The monthly charge for the toll-free number is independent of the number of calls taken.

9.      The depreciation on the playground equipment at a McDonald’s outlet.

10.        The cost of mozzarella cheese used at a Pizza Hut outlet.

Required:

Classify each cost as either variable or fixed with respect to the volume of goods or services produced and sold by the organization. Also classify each cost as a selling and administrative cost or as a product cost. Prepare your answer sheet as shown below. Place an X in the appro- priate columns to show the proper classifications of each cost.