Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883



Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Classify costs
Following is a list of various costs incurred in producing and selling college textbooks. With respect to the production and sale of textbooks, classify each cost as either variable, fixed, or mixed.
1. Art commission of $36,000 paid for use of art on textbook cover.
2. Sales commissions paid sales representatives based upon number of textbooks sold.
3. Electricity costs, $0.04 per kilowatt-hour.
4. Hourly wages of operators of printing presses.
5. Janitorial costs, $5,000 per month.
6. Packaging for customized texts and texts shipped with software codes.
7. Paper used in priming the textbooks.
8. Property insurance premiums, $1,800 per month plus $0.05 for each dollar of property over $2,000,000
9. Property taxes, $615,000 per year on factory building and equipment.
10. Rent on warehouse, $12,800 per month plus $2.50 per square foot of storage used.
11. Royalty paid authors for each textbook sold.
12. Salary of plant manager.
13. Sales commission paid lo of $ 100,000 plus $0.50 for each textbook sold online.
14. Straight-line depreciation on the production equipment.
15. Technology development costs of $1,200,000.

To determine

Concept introduction:

Variable cost:

The cost which is incurred with the production of the product is referred as variable cost. This cost is not fixed and changes as per the changes in the production level i.e. increase with the increase in production level and decreases with the reduction in the production level.

Fixed Cost:

Fixed cost is the one which is incurred irrespective of the production level. This cost does not change with the production level. This may be incurred even if there is no production.

Mixed Cost:

Mixed cost is the one which has both characteristics, i.e., fixed and variable. These kinds of costs are known as semi-variable or semi-fixed cost.

The cost classification for the production and selling of textbooks.


The table showing the cost classification is as follows:

    CostVariable CostFixed CostMixed Cost
    Art commission for textbook coverYes
    Sales commission to sales representativeYes
    Electricity costYes
    Hourly wages for printing Yes
    Janitorial costsYes
    Packaging for customized textsYes
    Paper used in ...

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