MANAGEMENT ACCOUNTING & CONTROL

MBA – 1st Trimester SY 2021-22

COST CONCEPTS AND CLASSIFICATIONS

Learning Activity 5

Agapay Bargain Store, ABS, has been engaged in buying and distributing video and musical
items. Sales are recorded separately for both items. Classify each of the cost items below as
either direct or indirect (D or I) with respect to the musical section and either Variable or Fixed
(V or F) with respect to how the total costs of the musical section as the number of musical
items sold changes. Normally, you will have two answers (D or I, V or F) for each of the
following cost items:

Cost Items D or I V or F
a. Cost of coffee provided free to all customers I V
b. Freight costs of musical items shipped by suppliers to D V
CBS
c. Subscription to Musical Trends magazine D F
d. Annual retainer paid to musical items distributor D F
e. Electricity costs of CBS, single bill covers entire store I V
f. Cost of musical items purchased for sale to customers D V
g. Salary of the general manager of CBS I F
h. Depreciation expense on store’s lease improvements I F
i. Leasing of computer software used for financial I F
budgeting CBS Store
j. General supplies for store maintenance I V
k. Communications costs to suppliers and customers I F
l. Salary of musical items Supervisor I F
m. Salary of video items Supervisor I F
n. Store advertising expense covering all items held for I F
sale