Classify the following items on the basis of cost: [April – 05]
(a) On the basis of functions:
(i) Legal expenses (ii) Rent of warehouse
(iii) Packing expenses (iv) Fuel and oil.
(b) On the basis of traceability to product:
(i) Office cleaning (ii) Factory supervision
(iii) Freight inward charges (iv) Raw materials imported
(c) On the basis of relation to change in the volume of activity:
(i) Factory insurance (ii) Depreciation of office building
(iii) Direct labour (iv) Show room expenses.

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Soln:
(a) On the basis of functions: [Factory, office and Administration and Selling and
Distribution Expenses]
(i) Legal expenses – Office and Administration Cost
(ii) Rent of warehouse – Selling and Distribution Cost
(iii) Packing expenses – Selling and Distribution Cost
(iv) Fuel and oil. – Factory Cost
(b) On the basis of traceability to product: [Direct/Indirect Cost]
(i) Office cleaning – Indirect Cost
(ii) Factory supervision – Direct Cost
(iii) Freight inward charges – Indirect Cost
(iv) Raw materials imported – Direct Cost
(c) On the basis of relation to change in the volume of activity: [Fixed/Variable/Semi
Fixed/ Semi Variable]
(i) Factory insurance – Fixed Cost
(ii) Depreciation of office building – Variable Cost
(iii) Direct labour – Fixed Cost
(iv) Show room expenses. – Fixed Cost

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