Which of the following expenses areFixed and variable?

Question

I need to know which of the following expenses are fixed and variable:

Indirect materials 2,000

Administrative salaries 35,000

Utilities 21,000

Rent 16,000

Miscellaneous costs 3,000

Insurance 7,000

Advertising expense 120,000

Amortization 2,400

Shipping expense 10,000

Marketing report 2,000

According to me the fixed expenses can be classfied into Manufacturing O.H, Admn expenses, Selling Expenses so fixed expenses can be grouped into following heads:

Manufacturing Over head:

Indirect Material 2000

Utilities 21000

Rent 16000

Insurance 7000

Amortization 2400

Administrative Expenses :

Administrative Salaries 35000

Miscellaneous Cost 3000

Selling Expenses:

Advertising expenses 120000 x 10% = 12000

Shipping Expenses 10000

Let me know if i am doing it in the right way

Answer 1

Ok just remember that fixed are the kind that does not change like your rent, Insurance, Administrative salaries, while variables do change like utilities, Miscellaneous coust. I hope I help. Good luck

Answer 2

If the question is to separate between F/V, then focus on that thing with an assumption.

Indirect materials = V, you are right they're normally part of the OH expense & also closely related to DM cost which are variable also.

Administrative salaries = F, salary for admin normally doesn't contains commission which are closely related to sales which are variable,

Utilities = Mix - Var. Depending on where you are. Utilities are normally a mix cost. It has a fix charge/ flat charge and then variable (based on usage). If usage is high then it's normally considered as V cost.

Rent = F. This is normally paid on an annual basis & base on a contract with an agreed/ fixed price.

Miscellaneous costs = V. The name says it all, Misc. It happens from time to time and may be fixed in nature but $ wise would probably relate to activities, thus V.

Insurance = Fix, similar to rent.

Advertising expense = Fix, similar to rent

Amortization = Fix, like depreciation/ similar to rent

Shipping expense = Var, normally depends on activity

Marketing report = Fix, similar to rent. This is probably a contract with a company that do research in marketing stuff, the user of their reports engage with a contract fee to use it.