Identifying variable costs and discretionary fixed costs


Question:

Identifying variable costs, committed fixed costs, and discretionary fixed costs

Required:

Classify each of the following costs for a jeans manufacturing company as a variable cost, committed fixed cost, or discretionary fixed cost.

a. The cost of buttons.

b. The cost to lease warehouse space for completed jeans. The lease contract runs for two years at $5,000 per year.

c. The salary of a summer intern.

d. The cost of landscaping and mowing the grass. The contract with a local mowing company runs from month to month.

e. Advertising in a national magazine for teenage girls.

f. Electricity to run the sewing machines.

g. Oil and spare needles for the sewing machines.

h. Quality training for employees-typically given for four hours at a time, every six months.

i. Food and beverages for the company Fourth of July picnic.

j. Natural gas to heat the factory during the winter.

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Accounting Basics: Identifying variable costs and discretionary fixed costs
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