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Cost Classifications

Outer Banks Shirt Shop manufactures T-shirts and decorates them with custom designs for retail sale on the premises. Several costs incurred by the company are listed below.

Match the following cost classification with the cost Item listed below. A cost item may have more than one cost classification.


a. Variable cost

b. Fixed cost

c. Direct Material

d. Direct labor

e. Indirect labor

f. Period

g. Product

h. Administrative

i. Selling

j. Manufacturing

k. Research and Development

l. Manufacturing Over Head


____ 1. Cost of fabric used in T-shirts.

____ 2. Wages of shirt makers.

____ 3. Cost of new sign in front of retail T-shirt shop.

____ 4. Wages of the employee who repairs the firm's sewing machines.

____ 5. Cost of electricity used in the sewing department.

____ 6. Wages of T-shirt designers and painters.

____ 7. Wages of salaried personnel.

____ 8. Depreciation on sewing machines.

____ 9. Rent on the portion of the building use to make the T-shirts.

____ 10. Cost of daily advertisements in local media.

____ 11. Wages of designers who experiment with new fabrics, paints, and T-shirt designs.

____ 12. Cost of hiring a pilot to fly along the beach pulling a banner advertising the shop.

____ 13. Salary of owner's secretary.

____ 14. Cost of insurance for the production employees.

Solution Preview

Cost has been defined by many experts in different terms though the crux of all of them remains same i.e. the price you pay to get something. It may or may not be quantifiable. As per Sprouce, Robert and Mourice "Cost is an exchange price, a foregoing, a sacrifice made to secure some benefit." The Institute of Management Accountants, USA, says "cost is a measurement in monetary terms of the amount of resources used for some purpose." 9 pg 19 cost accounting ...

Solution Summary

Response discusses Cost Classifications