Question

Cromwell Furniture Company manufactures sofas for distribution to several major retail chains. The following costs are incurred in the production and sale of sofas:
Required: Classify the costs as either fixed costs, variable costs, or mixed cost.

a. Fabric for sofa coverings

b. Wood for framing the sofas

c. Legal fees paid to attorneys in defense of the company in a patent infringement suit,

$25,000 plus $160 per hour

d. Salary of production supervisor

e. Cartons used to ship sofas

f. Rent on experimental equipment, $50 for every sofa produced

g. Straight-line depreciation on factory equipment

h. Rental costs of warehouse, $30,000 per month

i. Property taxes on property, plant, and equipment

j. Insurance premiums on property, plant, and equipment, $25,000 per year plus $25 per $25,000 of insured value over $16,000,000

k. Springs

l. Consulting fee of $120,000 paid to efficiency specialists

m. Electricity costs of $0.13 per kilowatt-hour

n. Salesperson’s salary, $80,000 plus 4% of the selling price of each sofa sold

o. Foam rubber for cushion fillings

p. Janitorial supplies, $2,500 per month

q. Employer’s FICA taxes on controller’s salary of $180,000

r. Salary of designers

s. Wages of sewing machine operators

t. Sewing supplies

Instructions
Classify the preceding costs as either fixed, variable, or mixed. Use the following tabular head- ings and place an X in the appropriate column. Identify each cost by letter in the cost column.



Cost Fixed Cost Variable Cost Mixed Cost

Answer 1

Answer:

• Fabric for sofa coverings Variable

• Wood for framing the sofa Variable

• Legal fees paid to attorneys in defense of the company in a patent infringement suit, $25,000 plus $160 per hour Mixed

• Salary of production supervisor Fixed

• Cartons used to ship sofas Variable

• Rent on experimental equipment, $50 for every sofa produced Variable

• Straight-line depreciation on factory equipment Fixed

• Rental costs of warehouse, $30,000 per month Fixed

• Properly taxes on properly, plant, and equipment Fixed

• Insurance premiums on properly, plant, and equipment, $25,000 per year plus $25 per $25,000 of insured value over $16,000,000 Mixed

• Springs Variable

• Consulting fee of $120,000 paid to efficiency specialists Fixed

• Electricity costs of $0.13 per kilowatt-hour Fixed

• Salesperson's salary $80,000 plus 4% of the selling price of each sofa sold Mixed

• Foam rubber for cushion fillings Variable

• Janitorial supplies, $2,500 per month Fixed

• Employer's FICA taxes on controller's salary of $180,000  Fixed

• Salary of designers Fixed

• Wages of sewing machine operators Variable

• Sewing supplies Variable