Refresh or test your cost accounting knowledge by answering the following questions on basic cost concepts. If you are unsure of the answer please click to { see article} to re-learn what you have missed.
Questions:1 Classify each of the following as being fixed(F), variable(V) or semi-variable(SV): (a) direct labor; (b) depreciation on machinery; © factory rental; (d) supplies and other indirect materials; (e) advertising; (f) maintenance of machinery; (g) factory manager’s salary; (h) supervisory personnel; (i) royalty payments. 2 Which of the following costs are likely to be controllable by the head of the production department? 3. For the relevant cost data in items (1) to (7), indicate which of the following is the best classification: 1) A company is considering selling an old machine. The machine has a book value of $15,000. In evaluating the decision to sell the machine, the $ 15,000 is a ….. 2) As an alternative to the old machine, the company can rent a new one. It will cost $10,000 a year. Analysing the cost-volume behaviour the rental is… 3) To run the firm’s machines, there are 2 alternative courses of actions. One is to pay the operator a base salary plus a small amount per unit produced. This makes the total cost of the operator a… 4) As an alternative, the firm can pay the operator a flat salary. It would then use 1 machine when volume is low, 2 machines when it expands, and 3 during peak periods. This means that the total operator cost would now be a…. 5) The machine mentioned in (1) could be sold for $11,000. If the firm considers retaining and using it, the $11,000 is a…. 6) If the firm wishes to use the machine any longer, it must be repaired. For the decision to retain the machine, the repair cost is a … 7) The machine is charged to the foreman of each department at a rate of $13,000 a year. In evaluating the foreman, the charge is a … 4. A company manufactures and retails clothing. You are required to group the costs which are listed below and numbered (1 – 12) into the following classifications (each cost is intended to belong to only one classification); (1) Lubricant for sewing machines |