Cost Classifications for: (1) Predicting Cost Behavior Financial Statements (2) Preparing Cost Item
Classifying Variable and Fixed Costs and Product and Period Costs
Below are listed various costs that are found in organizations.
1. Hamburger buns in a Wendy’s restaurant.
2. Advertising by a dental office.
3. Apples processed and canned by Del Monte.
4. Shipping canned apples from a Del Monte plant to customers.
5. Insurance on a Bausch & Lomb factory producing contact lenses.
6. Insurance on IBM’s corporate headquarters.
7. Salary of a supervisor overseeing production of printers at Hewlett-Packard.
8. Commissions paid to automobile salespersons.
9.
10. Steering wheels installed in BMWs.
Required:
Using the table shown below, describe each of the costs mentioned above in two ways. In terms of cost classifications for predicting cost behavior (column 1), indicate whether the cost is fixed or variable with respect to the number of units produced and sold. With respect to cost classifications for preparing financial statements (column 2), indicate whether the item is a product cost or period cost (selling and administrative cost).
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