Question

Problem 01-1A Cost computation, classification, and analysis LO C2, C3

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Listed here are the total costs associated with the production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $520 each.
  

	Costs
1.	Plastic for casing—$19,000
2.	Wages of assembly workers—$87,000
3.	Property taxes on factory—$6,000
4.	Accounting staff salaries—$39,000
5.	Drum stands (1,000 stands purchased)—$31,000
6.	Rent cost of equipment for sales staff—$48,000
7.	Upper management salaries—$170,000
8.	Annual flat fee for factory maintenance service—$13,000
9.	Sales commissions—$20 per unit
10.	Machinery depreciation, straight-line—$44,000

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.)
  

	Cost by Behavior Cost by Function Costs Variable Fixed Product Period 1. Plastic for casing $19,000 $19,000 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

2. Compute the manufacturing cost per drum set.

	TrueBeat Calculation of Manufacturing Cost per Drum Set Item Total cost Per unit cost Variable production costs Total variable production costs Fixed production costs Total fixed production costs Total production cost

Answer 1

*Variable cost-one that varies in direct proportion to the level of activity within the business.

*Fixed cost- The unavoidable operating expense that does not change in total, regardless of the level of activity.

*Period cost- It related to a particular time period instead of attached to the production of an asset;
treated as an expense in the period incurred.

*Product cost- all expenses required to manufacture the product: direct materials, direct labor, and
manufacturing overhead.

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