Chapter 2, Problem 2.25E

Classification of costs, manufacturing sector. The Cooper Furniture Company of Potomac, Maryland, assembles two types of chairs (Recliners and Rockers). Separate assembly lines are used for each type of chair.

Required

Classify each cost item (A–I) as follows:

1. a. Direct or indirect (D or I) cost for the total number of Recliners assembled.
2. b. Variable or fixed (V or F) cost depending on how total costs change as the total number of Recliners assembled 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 Recliners assembled.)

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
A. Cost of fabric used on Recliners
B. Salary of public relations manager for Cooper Furniture
C. Annual convention for furniture manufacturers; generally Cooper Furniture attends
D. Cost of lubricant used on the Recliner assembly line
E. Freight costs of Recliner frames shipped from Durham to Potomac, MD
F. Electricity costs for Recliner assembly line (single bill covers entire plant)
G. Wages paid to temporary assembly-line workers hired in periods of high Recliner production (paid on hourly basis)
H. Annual fire-insurance policy cost for Potomac, MD plant
I. Wages paid to plant manager who oversees the assembly lines for both chair types