Cost behavior; engineered cost; committed and discretionary costs: manufacturer (10 Marks)

HappyDaze T-shirts manufactures and prints customised designs on T-shirts. Below is a list of some of their major costs.

(a)           Cost of daily radio advertising on the local community radio station.

(b)           Cost of the fabric used to make the T-shirts.

(c)           Cost of the ink used in the designs.

(d)           Salary of the managing director.

(e)           Wages of the production employees who sew and print the T-shirts.

(f)            Cost of movie tickets provided for the Employee of the Month award each month.

(g)           Depreciation of the sewing machines, calculated on a units of production basis.

(h)           Cost of electricity used in the factory building.

(i)            Rent of the building.

(j)            Wages of the staff who package the T-shirts.

(k)           Cost of sewing machine maintenance.

(l)            Cost of the new advertising sign at the front of the factory.

(m)          Cost of the company car used by the managing director.

Required:

For each cost:

1              Indicate whether it is fixed or variable.

2              If the cost is variable, indicate whether it is an engineered cost. Explain why.

3              If the cost is fixed, indicate whether it is committed or discretionary. Explain why.

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