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Variable and Fixed Costs What follows are a number of resources that are used by a manufacturer of futons. Assume that the output measure or cost driver is the number of futons produced. All direct labor is paid on an hourly basis, and hours worked can be easily changed by management. All other factory workers are salaried. a. Power to operate a drill (to drill holes in the wooden frames of the futons) b. Cloth to cover the futon mattress c. Salary of the factory receptionist d. Cost of food and decorations for the annual Fourth of July party for all factory employees e. Fuel for a forklift used to move materials in a factory f. Depreciation on the factory g. Depreciation on a forklift used to move partially completed goods h. Wages paid to workers who assemble the futon frame i. Wages paid to workers who maintain the factory equipment j. Cloth rags used to wipe the excess stain off the wooden frames Required: Classify the resource costs as variable or fixed.

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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773
BuyFind

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773

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Chapter
Section
Chapter 3, Problem 34E
Textbook Problem
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Variable and Fixed Costs

What follows are a number of resources that are used by a manufacturer of futons. Assume that the output measure or cost driver is the number of futons produced. All direct labor is paid on an hourly basis, and hours worked can be easily changed by management. All other factory workers are salaried.

  1. a. Power to operate a drill (to drill holes in the wooden frames of the futons)
  2. b. Cloth to cover the futon mattress
  3. c. Salary of the factory receptionist
  4. d. Cost of food and decorations for the annual Fourth of July party for all factory employees
  5. e. Fuel for a forklift used to move materials in a factory
  6. f. Depreciation on the factory
  7. g. Depreciation on a forklift used to move partially completed goods
  8. h. Wages paid to workers who assemble the futon frame
  9. i. Wages paid to workers who maintain the factory equipment
  10. j. Cloth rags used to wipe the excess stain off the wooden frames

Required:

Classify the resource costs as variable or fixed.

Expert Solution
To determine

Categorize the resource costs as a fixed costs or variable costs.

Explanation of Solution

Fixed Cost:

Fixed cost is the cost which is not affected by the change in level of output. It remains unchanged in the short run, for example, property taxes, rent and salaries.

Variable cost is the cost which changes with the change in the level of output. In other words, variable cost increases with the increase in units produced and decreases with the decrease in units produced.

Classification of the resource costs as a fixed costs or variable costs:

CaseCost Resource
aVariable costPower to operate a drill is variable costs because this cost changes with the change in the level of output.
bVariable costCloth to cover the futon mattress depends on the needs of the consumer. Therefore, this cost is changes with the change in the level of output.
cFixed costSalary of the receptionist is a fixed cost and it does not change with the change in the level of output in the short run.
dVariable costCost of food and decorations for party in the office is a temporary cost and this cost depends on the employees...

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Chapter 3 Solutions

Managerial Accounting: The Cornerstone of Business Decision-Making
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