Q1TI - Horngren'S Financial And Managerial Accounting

Question

Following is a list of costs for a furniture manufacturer that specializes in wood tables. Classify each cost as variable, fixed, or mixed relative to the number of tables produced and sold. 

1. Wood used to build tables 

2. Depreciation on saws and other manufacturing equipment 

3. Compensation for sales representatives paid on a salary plus commission basis 

4. Supervisor’s salary 

5. Wages of production workers

Step-by-Step Solution

Answer

1. variable cost
2. Fixed cost
3. Mixed cost
4. Fixed cost
5. Variable cost

Meaning of variable, fixed, and mixed cost

The cost that consistent persistently per unit is known as a variable cost and the cost that remains consistent in total is known as a fixed cost. A cost that is fixed to an extent and variable above that is known as mixed cost.

Classification of cost

S. No.	Costs	Type of cost
1	Wood used to build tables	Variable
2	Depreciation on saws and other manufacturing equipment	Fixed
3	Compensation for sales representatives paid on a salary plus commission basis	Mixed
4	Supervisor’s salary	Fixed
5	Wages of production workers	Variable