2-17 Solution

2-17 (15 min.) Direct, indirect, fixed and variable costs.

1. Yeast – direct, variable

Flour- direct, variable

Packaging materials –direct (or could be indirect if small and not traced to each unit), variable

Depreciation on ovens –indirect, fixed (unless “units of output” depreciation, which then would be variable)

Depreciation on mixing machines–indirect, fixed (unless “units of output” depreciation, which then would be variable)

Rent on factory building – indirect, fixed

Fire Insurance on factory building–indirect, fixed

Factory utilities – indirect, probably some variable and some fixed (e.g. electricity may be variable but heating costs may be fixed)

Finishing department hourly laborers – direct, variable (or fixed if the laborers are under a union contract)

Mixing department manager – indirect, fixed

Materials handlers –depends on how they are paid. If paid hourly and not under union contract, then indirect, variable. If salaried or under union contract then indirect, fixed

Custodian in factory –indirect, fixed

Night guard in factory –indirect, fixed

Machinist (running the mixing machine) –depends on how they are paid. If paid hourly and not under union contract, then indirect, variable. If salaried or under union contract then indirect, fixed

Machine maintenance personnel – indirect, probably fixed, if salaried, but may be variable if paid only for time worked and maintenance increases with increased production

Maintenance supplies – indirect, variable

Cleaning supplies – indirect, most likely fixed since the custodians probably do the same amount of cleaning every night

2. If the cost object is Mixing Department, then anything directly associated with the Mixing Department will be a direct cost. This will include:

• Depreciation on mixing machines

• Mixing Department manager

• Materials handlers (of the Mixing Department)

• Machinist (running the mixing machines)

• Machine Maintenance personnel (of the Mixing Department)

•...