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Wilson Co. purchased land as a factory site for $800,000. Wilson paid $80,000 to tear down two buildings on the land. Salvage was sold for $5,400. Legal fees of $3,480 were paid for title investigation and making the purchase. Architect's fees were $31,200. Title insurance cost $2,400, and liability insurance during construction cost $2,600. Excavation cost $10,440. The contractor was paid $2,500,000. An assessment made by the city for pavement was $6,400. Interest costs during construction were $170,000.The cost of the building that should be recorded by Wilson Co.
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Discuss whether direct labor is a fixed or a variable cost. What are the pros and cons of management treating direct labor as a variable cost?
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