Question

Essential College Supplies (ECS) is a store on the campus on a large Midwestern university. The store has both an apparel section (t-shirts with the school logo) and a convenience section. ECS reports revenues for the apparel section separately from the convenience section. Requirement Classify each cost item (A-H) as follows:
a. Direct or indirect (D or I) costs of the total number of t-shirts sold.
b. Variable or fixed (V or F) costs of how the total costs of the apparel section change as the total number of t-shirts sold changes. (If in doubt, select on the basis of whether the total costs will change substantially if there is a large change in the total number of t-shirts sold.)
Requirement
a. Classify each cost item (A-H) as direct or indirect (D or I) costs of the total number of t-shirts sold. Cost Item D or A. Annual fee for licensing the school logo
b. Cost of store manager's salary
c. Costs of t-shirts purchased for sale to customers
d. Subscription to College Apparel Trends magazine
e. Leasing of computer software used for financial budgeting at the ECS store
f. Cost of coffee provided free to all customers of the ECS store
g. Cost of cleaning the store every night after closing
h. Freight-in costs of t-shirts purchased by ECS

Answer 1

Answer:

a. Annual fee for licensing the school logo - Direct cost - Fixed Cost

b. Cost of store manager's salary - Indirect Cost - Fixed Cost

c. Costs of t-shirts purchased for sale to customers - Direct cost - Variable cost

d. Subscription to College Apparel Trends magazine - Direct cost -  Fixed Cost

e. Leasing of computer software used for financial budgeting at the ECS store  - Indirect Cost -  Fixed Cost

f. Cost of coffee provided free to all customers of the ECS store  - Indirect Cost - Variable cost

g. Cost of cleaning the store every night after closing  - Indirect Cost -  Fixed Cost

h. Freight-in costs of t-shirts purchased by ECS - Direct cost - Variable cost