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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Classify costs

Peak Apparel Co. manufactures a variety of clothing types for distribution to several major retail chains. The following costs are incurred in the production and sale of blue jeans:
a. Shipping boxes used to ship orders
b. Consulting fee of $200,000 paid to industry specialist for marketing advice C. Straight-line depreciation on sewing machines
d. Salesperson's salary, $10,000 plus 2% of the total sales
e. Fabric
f. Dye
g. Thread
h. Salary of designers
i. Brass buttons
j. Legal fees paid to attorneys in defense of the company in a patent infringement suit, $50,000 plus $87 per hour
k. Insurance premiums on property, plant, and equipment. $70,000 per year plus $5 per $50,000 of insured value over $8,000,000
I. Rental costs of warehouse, $5,000 per month plus $4 per square foot of storage used
m. Supplies
n. Leather for patches identifying the brand on individual pieces of apparel
o. Rent on plant equipment, $50,000 per year
p. Salary of production vice president
q. Janitorial services. $2,200 per month
r. Wages of machine operators
s. Electricity costs of $0.10 per kilowatt-hour
t. Property taxes on property, plant, and equipment
Instructions
Classify the preceding costs as either fixed, variable, or mixed. Use the following tabular headings and place an "X" in the appropriate column. Identify each cost by letter in the cost column.

To determine

Concept Introduction:

Fixed Cost: Those costs which are fixed in totality over a period then it are called fixed cost. Fixed cost is different on unit basis.

Variable cost: Those costs which are changes in totality when the output changes but its remains same on per unit basis.

Mixed Cost: Those costs which have both the features of fixed and variable cost are called mixed cost.

To Identify:

List the various cost as variable cost, fixed cost, and mixed cost.

Explanation

Fixed Cost: Those costs which are fixed in totality over a period then it are called fixed cost. Fixed cost is different on unit basis.

Variable cost: Those costs which are changes in totality when the output changes but its remains same on per unit basis...

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