ABC Manufacturing Wants to Determine Whether Its Various Product Costs

question 4

Short Answer

ABC Manufacturing wants to determine whether its various product costs are direct or indirect and variable or fixed. This information will be used to determine product unit costs. All employees are guaranteed a 40 hour work-week except factory employees, who are paid an hourly wage and can be sent home when there is no work. The following classification scheme has been developed:
A. Direct variable cost
B. Indirect variable cost
C. Direct fixed cost
D. Indirect fixed cost
Using the categories shown above, indicate how each of the following costs should be classified if the cost object is a single unit of product:
____ 1. Labour in the maintenance department
____ 2. Glue and tacks used in production
____ 3. Lubricating oil for production machines
____ 4. Salary of the plant accountant
____ 5. Oil used for monthly preventive maintenance on production machines
____ 6. Insurance on the plant machinery
____ 7. Hourly factory wages
____ 8. Wages in the materials receiving and handling department
____ 9. Taxes on plant equipment
____ 10. Shipping costs for direct materials

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Definitions:

Factor Analysis

A statistical approach designed to uncover hidden variables or factors that account for the observed correlation patterns within a set of variables.

Clinical Studies

Research conducted with human volunteers aimed at evaluating medical, surgical, or behavioral interventions.

Psychoanalytic

Relating to a psychological theory and therapy developed by Sigmund Freud that emphasizes unconscious motivations and conflicts as the drivers of human behavior.

Self-Actualized

The achievement of realizing one's abilities and potential, often seen as a universal drive or necessity.