Classification of costs, merchandising sector. Band Box Entertainment (BBE) operates a large store in Atlanta, Georgia. The store has both a movie (DVD) section and a music (CD) section. BBE reports revenues for the movie section separately from the music section. Classify each cost item (A–H)  as follows:Direct or indirect (D or I) costs of the total number of DVDs sold.Variable or fixed (V or F) costs of how the total costs of the movie section change as the total number of DVDs sold changes. (If in doubt, select on the basis of whether the total costs will change substantially if there is a large change in the total number of DVDs sold.)You will have two answers (D or I; V or F) for each of the following items: Cost Item D or I V or FAnnual retainer paid to a video distributorCost of store manager’s salaryCosts of DVDs purchased for sale to customersSubscription to DVD Trends magazineLeasing of computer software used for financial budgeting at the BBE storeCost of popcorn provided free to all customers of the BBE storeCost of cleaning the store every night after closingFreight-in costs of DVDs purchased by BBE

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Asked Dec 17, 2019
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Classification of costs, merchandising sector. Band Box Entertainment (BBE) operates a large store in Atlanta, Georgia. The store has both a movie (DVD) section and a music (CD) section. BBE reports revenues for the movie section separately from the music section. Classify each cost item (A–H)  as follows:

  1. Direct or indirect (D or I) costs of the total number of DVDs sold.
  2. Variable or fixed (V or F) costs of how the total costs of the movie section change as the total number of DVDs sold changes. (If in doubt, select on the basis of whether the total costs will change substantially if there is a large change in the total number of DVDs sold.)

You will have two answers (D or I; V or F) for each of the following items: Cost Item D or I V or F

  1. Annual retainer paid to a video distributor
  2. Cost of store manager’s salary
  3. Costs of DVDs purchased for sale to customers
  4. Subscription to DVD Trends magazine
  5. Leasing of computer software used for financial budgeting at the BBE store
  6. Cost of popcorn provided free to all customers of the BBE store
  7. Cost of cleaning the store every night after closing
  8. Freight-in costs of DVDs purchased by BBE
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Classify the cost items as direct costs ...

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Cost Item Classification Explanation A. Annual retainer D (Direct cost) paid. Annual retainer paid to a video distributor is a direct cost as cost driver can be directly traced B. Cost of store I (Indirect cost) Cost of store manager's salary is an cost driver cannot be indirect cost as manager's salary. directly traced. Cost of DVD purchased for sale to customers is a direct cost as cost driver C. Cost of DVD D (Direct cost) purchased for sale to can be directly traced. Subscription to DVD trends magazine is a direct cost as cost driver can be directly traced. customers. D. Subscription to D (Direct cost) DVD trends magazine. Leasing computer software used for financial of I (Indirect cost) Leasing of computer software used for financial budgeting of the store is an indirect cost as cost driver cannot be E. budgeting of the directly traced. store. F. Cost of popcom I (Indirect cost) Cost of popcom provided free to the provided free to the customer is an indirect cost as cost driver cannot be directly traced. Cost of cleaning the store is an indirect customer. G. Cost of cleaning I (Indirect cost) the store. cost driver cannot be directly cost as traced. H. Freight-in costs D (Direct cost) of DVDS purchased. Freight-in costs of DVDS purchased is a direct cost as cost driver can be directly traced.

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