(WIP) ACC 350 Exam 1 Study Material

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Solutions
ACC 350
In-Class Problems – Chapter 2
#1 – Identify Costs
The Temp Company manufactures bicycles and has the following costs:
DM DL MOH
Period or
Product
Fixed or
Variable
1. Assembly-line worker’s wages X Product Variable
2. Factory heating and air conditioning X Product Fixed
3. Salaries of the company’s top executives Period Fixed
4. Sales Commissions Period Variable
5. Production supervisor’s salary X Product
Fixed
6. Research and development costs Period Fixed
7. Chains used to make bicycles X Product Variable
8. Supplies (e.g. lubricant) used to make
bicycles
X
Product
Variable
9. Freight-in on direct materials X Product Variable
10. Freight-out to ship goods Period Variable
11. Quality inspectors’ salaries X Product Fixed
12. Material handler salaries X Product Fixed
13. Process design engineer salaries X Product Fixed
14. Electricity for the machines X Product Variable
15. OT premium paid to assembly workers X Product Variable
16. Property taxes on the factory & office* X
17. Office rental for cost-management staff* X
Product or
Period
Product or
Period
Fixed
Fixed
Identify each cost as Direct Material (DM), Direct Labor (DL), or Manufacturing Overhead (MOH), as a
Period or Product Cost, and as a Fixed or Variable Cost.
* Depends on location. If a factory office—MOH; if an administrative office—Period Expense.
Note: many of the fixed costs are fixed within a relevant range. As volume increases beyond the relevant
range, additional supervisors, inspectors, etc. will need to be hired.
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