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31 January, 10:10

EB4.

Roper Furniture manufactures office furniture and tracks cost data across their process. The following are some of the costs that they incur. Classify these costs as fixed or variable costs, and as product costs or period costs.

Wood used to produce desks ($125.00 per desk)

Production labor used to produce desks ($15 per hour)

Production supervisor salary ($45,000 per year)

Depreciation on factory equipment ($60,000 per year)

Selling and administrative expenses ($45,000 per year)

Rent on corporate office ($44,000 per year)

Nails, glue, and other materials required to produce desks (varies per desk)

Utilities expenses for production facility

Sales staff commission (5% of gross sales)

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Answers (1)
  1. 31 January, 11:01
    0
    Fixed and Variable cost:

    Fixed cost are the costs which cannot be changed with change in the level of goods and services sold or produced.

    Variable cost are the costs which changes with change in the level of output produced and sold.

    Product and Period cost:

    Product costs are the costs which are incurred for making the product such as direct material, factory overhead and direct labor, etc.

    Period costs refers to the cost which are incurred for a certain period of time. It is normally associated with the time period than with any type of transactional event.

    Therefore, the classification of items is as follows:

    (a) Variable cost - Product cost

    (b) Variable cost - Product cost

    (c) Fixed cost - Period cost

    (d) Fixed cost - Period cost

    (e) Fixed cost - Period cost

    (f) Fixed cost - Period cost

    (g) Variable cost - Product cost

    (h) Fixed cost - Period cost

    (i) Fixed cost - Period cost
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