Class Exercise 2: Identification of Cost Element and Cost Behavior
Name: Roll No:
Note 1: Identify Cost Element as DM/DL/DE/Factory Overheads/Admin Overheads/Selling
Overheads/Distribution Overheads/Finance Cost
Note 2: Identify Cost Behavior as Fixed/Variable/Semi-variable/Semi-Fixed or Stepped Fixed Cost
S. No. Costs Cost Element Cost Behavior
1 Overalls for machine workers
2 Cost of printer cartridges in general office
3 Salary of factory supervisor
4 Salary of payroll supervisor
5 Rent of warehouse for storing goods ready for sale
6 Loan interest
7 Salary of factory security guard
8 Early settlement discounts for customers who pay early
9 Salary of the Chairman’s PA
10 Road tax licence for delivery vehicles
11 Bank overdraft fee
12 Salesmen's commissions
13 Advertising costs
14 Depreciation of factory machinery
15 Audit fees
16 Packaging material for finished goods
17 Courier charges for product samples sent to customers
18 Legal expenses for routine company operations
19 Insurance on factory equipment
20 Freight-out (delivery to customer)
21 Salary of marketing manager
22 Utilities (electricity/water) in the production plant
23 Training expenses for factory workers
24 Commission paid to advertising agency
25 Annual fee for credit rating agency
26 Bonus to office administrative staff
27 Steel used in car manufacturing
28 Wages paid to assembly line workers
29 Royalties paid per unit to tech patent owner (for each product)
30 Cost of special tools used only for one customer’s product line
31 Leather used in making handbags
32 Carpenter’s wages in custom furniture making
33 Social media management software subscription
34 Raw cotton used in T-shirt production
35 Factory rent
36 Fuel cost for delivery trucks
37 Annual salary increments to IT staff
38 Temporary staff hired for seasonal demand
39 IT system maintenance contracts
40 Royalty paid per unit sold (musical content licensing)
41 Cost of molds used in one specific batch of manufacturing
42 Employee health insurance premiums
Some Numerical (Cost/unit and High-low method)
1. Jughead Jones LLP has the following information relating to one of its products:
• Direct material cost per unit $1
• Direct labour cost per unit $3
• Variable production cost per unit $3
• Fixed production overhead $30,000 per month
• Budgeted production: 15,000 units per month
Required: Calculate the cost per unit and the total cost of the budgeted monthly production.
2. From the books of Pinto Manufacturers, the following data is extracted. Below is the data on
Units manufactured and Maintenance costs. Required: Using the high-low method, find out the
fixed and variable components of the Maintenance cost
Month Units $
Jan 586 12,340
Feb 503 11,949
Mar 600 12,400
Apr 579 12,298
May 550 12,075
Jun 500 12,000
3. As the manager of an Indian restaurant with a take-away service, you have been asked to
prepare a detailed budget for next year. To help you with this, you need to know the fixed and
variable cost elements of your delivery cost to customers’ homes. The following information is
available from the monthly accounts. Calculate the fixed and variable cost elements using the
high–low method.
Month No. of deliveries Delivery Cost
Jul 403 662.70
Aug 291 561.90
Sept 348 613.20
Oct 364 627.60
Nov 521 768.90
Dec 387 648.30
4. The following information relates to the manufacture of Product LL:
Output (units) Total cost ($)
200 7,000
300 8,000
400 8,600
For output volumes above 350 units, the variable cost per unit falls by 10%. Required: Estimate
the cost of producing 450 units of Product LL.