Question

identify fixed and variable costs

intuit inc. (intu) develops and sells software products for the personal finance market, including popular titles such as quickbooks® and turbotax®. classify each of the following costs and expenses for this company as either variable or fixed to the number of units produced and sold:

a. packaging costs
b. sales commissions
c. property taxes on general offices
d. shipping expenses
e. straight-line depreciation of computer equipment
f. presidents salary
g. salaries of software developers
h. salaries of human resources personnel
i. wages of telephone order assistants
j. costs of providing online support
k. users guides

Explanation:

Classify variable costs

Variable costs change in direct proportion to the number of units produced and sold.

• a. Packaging costs (directly tied to units sold) -> Variable
• b. Sales commissions (directly tied to units sold) -> Variable
• d. Shipping expenses (directly tied to units sold) -> Variable
• i. Wages of telephone order assistants (varies with order volume/units sold) -> Variable
• j. Costs of providing online support (varies with user/unit volume) -> Variable
• k. Users' guides (one packaged per unit sold) -> Variable

Classify fixed costs

Fixed costs remain constant in total regardless of changes in the level of activity/units sold.

• c. Property taxes on general offices -> Fixed
• e. Straight-line depreciation of computer equipment -> Fixed
• f. President's salary -> Fixed
• g. Salaries of software developers -> Fixed
• h. Salaries of human resources personnel -> Fixed

Answer:

a. Packaging costs: Variable cost
b. Sales commissions: Variable cost
c. Property taxes on general offices: Fixed cost
d. Shipping expenses: Variable cost
e. Straight-line depreciation of computer equipment: Fixed cost
f. President's salary: Fixed cost
g. Salaries of software developers: Fixed cost
h. Salaries of human resources personnel: Fixed cost
i. Wages of telephone order assistants: Variable cost
j. Costs of providing online support: Variable cost
k. Users' guides: Variable cost