Reference no: EM132562667
COST CLASSIFICATIONS:
Star Furniture manufactures furniture. Listed below is some of the cost incurred by the firm.
1. The wood used to make sofa sets cost $50 per sofa.
2. The sofas are assembled by workers at the wage of $20 per sofa.
3. Company has recently hired a factory supervisor to monitor the work done by the labors. He will bepaid monthly salary of $5,000.
4. Electrical cost is $20 per machine hour. Four machine hours are required to manufacture one sofa.
5. The depreciation cost of the machines used to make sofa is total $10,000 per month. The machines have no resale value.
6. The CEO of the company is paid a monthly salary of $20,000.
7. The company spends $50,000 per month on advertisement.
8. Salespersons are paid monthly salary of $15,000 and a commission @ 2% for each sofa sold.(Selling price per sofa is $3,000)
Question A. Classify each of the above cost into fixed, variable and semi-variable (Mixed) costs.
Question B. Classify each of the above cost into product (D.M./ D.L/ F.O.H.) or period cost (Marketing & selling or administrative & general expense)
Question C. Compute the total cost that would be incurred during the month of October with a production level of 60 sofas and a sales level of 40 sofas.
Question D. cost formula to express the cost behavior of the firm's production cost only.
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: Compute the total cost that would be incurred during the month of October with a production level of 60 sofas and a sales level of 40 sofas
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