Topic 1 Formative Assessment Part 1

For each cost item, indicate whether it would be variable or fixed with respect to the number of units
produced and sold; and then whether it would be a period cost or a product cost. If it is a product cost,
indicate whether it would typically be treated as a direct cost or an indirect cost with respect to unit

Period Product Cost

Variable Fixed
Cost Item Cost Direct Indirect
1. Property taxes, factory X
2. Boxes used for packaging breakfast cereal produced the
X
company
3. Salespersons’ commission X
4. Factory supervisor’s salary X
5. Depreciation – executive automobile X
6. Wages of workers in assembling cars. X
7. Insurance, finished goods warehouses X
8. Lubricants for production equipment X
9. Advertising costs. X
10. Microchips used in producing calculators X
11. Shipping costs on merchandise sold X
12. Magazine subscriptions, factory lunchroom X
13. Thread in a garment factory X
14. Billing costs X
15. Executive life insurance X
16. Ink used in textbook production X
17. Fringe benefits, assembly line workers X
18. Yarn used in sweater production X
19. Wages of receptionist, executive offices X