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Applying Cost Classifications

For each of the following costs, identify whether the item is a variable or fixed cost, direct or indirect cost, and controllable or uncontrollable cost. (For example: Plant Utilities would be a variable, indirect, and controllable cost.) Not all items will fit into each category. Label items that do not fit a categories as not applicable.

- Raw materials
- Staples used to secure packed boxes of the product
- Plant janitor's wages
- Order processing clerk's wages
- Advertising expenses
- Production worker's wages
- Production supervisor's salaries
- Sales force commissions
- Maintenance supplies used
- President's salary
- Electricity cost for the office building
- Real estate taxes for the plant
- Production run setup costs
- Depreciation of plant equipment
- Outbound shipping costs

Solution Preview

In the classification on whether a cost is controllable or non-controllable, the perspective of the production responsibility center is adopted. However, in the classification on whether a cost is direct or indirect, the plant's product's perspectives.

Raw materials.
variable, direct, controllable

Staples used to secure packed boxes of the product.
variable, indirect, non-controllable
Non-controllable because staples is a supply and usually purchased centrally rather than by responsibility center

Plant janitor's wages.
Fixed, indirect, non-controllable

Order processing clerk's wages. ...

Solution Summary

Cost classifications such as variable, fixed, direct, or indirect cost, are applied.