Assignment:
Variable costs change in proportion to the changes in production or other manufacturing volume, while fixed costs are incurred even if no items are produced or sold. These costs are an important part in preparing budgets and cost analysis for decision making.
This portion of the course project has 2 parts.
For the first portion of the assignment, you are required to classify each of the following factory overhead items as either a fixed or a variable cost. You should include any costs you would consider semivariable within the variable category.
a. Indirect labor
b. Indirect materials
c. Insurance on building
d. Overtime premium pay
e. Depreciation on building (straight-line)
f. Polishing compounds
g. Depreciation on machinery (based on machine hours used)
h. Employer's payroll taxes
i. Property taxes
j. Machine lubricants
k. Employees' hospital insurance (paid by employer)
l. Labor for machine repairs
m. Vacation pay
n. Janitor's wages
o. Rent
p. Small tools
q. Plant manager's salary
r. Factory electricity
s. Product inspector's wages
Next, identify specific fixed and variable costs that would likely be incurred by FORD MOTOR COMPANY, and also indicate which factory overhead allocation method would be best suited for your company given the nature of its operations and explain your reasoning.
Both portions of the assignment should be submitted in a 2 to 3 page Word document.