Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 36

Classification of Costs Following is a list of costs from Oakland Company, a furniture manufacturer:

1. Wood used in chairs

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2. Salaries of inspectors

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3. Lubricant used in machinery

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4. Factory rent

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5. Wages of assembly workers

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6. Factory workers’ compensation insurance

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7. Sandpaper

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8. Fabric used for upholstery

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9. Property taxes on manufacturing plant

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10. Depreciation on machinery

Required Classify each cost as direct or indirect assuming that the cost object is each item manufactured. Also indicate whether each cost is a variable or fixed cost.

Step 1 of 4

Direct Cost: Direct costs are directly traceable to the product and vary directly with the level of production.

Example of direct costs is raw material, Wages paid to labor, commissions, piece rate wages etc.