Chapter 1: Introduction to Manufacturing
Problem 1-2
1. DM used - Variable
Explanation:
Direct-material cost increases or decreases in direct proportion to the number of
units produced.
2. Direct Labor - Variable
Explanation:
Direct-labor cost generally changes according to the number of production hours or
units completed.
3. Salesmen's salaries - Fixed
Explanation:
Base salaries represent a constant monthly expenditure that does not fluctuate
regardless of the volume of goods sold.
4. Salesmen's commission - Variable
Explanation:
Commission expense changes directly with the value or volume of sales.
5. Shipping supplies - Variable
Explanation:
More shipping supplies are used as the number of products sold and delivered
increases.
6. Property taxes - Fixed
Explanation:
Property taxes are normally based on assessed property value and do not change
with production volume.
7. Factory heat, light, power - Semi-variable
Explanation:
Factory utilities usually include a basic fixed charge plus a variable amount based on
usage.
8. Legal and audit fees - Fixed
Explanation:
These professional fees are generally incurred periodically and are not directly
affected by production volume.
9. Depn. of equip. (SL) - Fixed
Explanation:
Straight-line depreciation records the same expense each period regardless of
equipment usage.
10. Depn. of equip. (Output) - Variable
Explanation:
Under the output method, depreciation expense depends on the number of units
produced or machine hours used.
11. Fire insurance of equip. - Fixed
Explanation:
Insurance premiums are usually predetermined for the coverage period and do not
vary with output.
12. Overtime premium - Variable
Explanation:
Overtime premiums generally increase when additional labor hours are required for
higher production activity.
13. Factory superintendent salary - Fixed
Explanation:
The superintendent receives a regular salary that normally remains unchanged
within the relevant range.
14. Handling cost of materials - Variable
Explanation:
Material-handling costs generally increase as more materials are received and
moved for production.
15. Factory rent - Fixed
Explanation:
Factory rent is normally a set amount paid each period regardless of production
volume.
16. Idle time w/pay - Fixed not sure
Explanation:
Employees are paid for idle time even though no production is being performed, so
the amount does not directly vary with output.
17. Washroom supplies - Semi-variable not sure
Explanation:
These maintenance supplies have a baseline consumption level for regular staff but scale up up
as additional labor shifts are scheduled to meet higher output demands.
18. Repairs to machinery - Semi-variable
Explanation:
Machinery repairs may include routine fixed maintenance and additional costs that
rise with equipment usage.
19. Indirect labor - Variable
Explanation:
Indirect labor includes hourly support workers whose total hours and wages
increase or decrease directly with production volume.
20. Salary of accounting clerk - Fixed
Explanation:
The accounting clerk receives a regular salary that normally does not change with
production or sales volume.