LO.1–LO.3 (Cost classifications)
Geoff Payne painted four houses during April 2010. For these jobs, he spent $1,200 on paint, $80 on
mineral spirits, and $300 on brushes. He also bought two pairs of coveralls for $100 each; he wears
coveralls only while he works. During the first week of April, Payne placed a $100 ad for his business in
the classifieds. He hired an assistant for one of the painting jobs; the assistant was paid $25 per hour
and worked 50 hours.
Being a very methodical person, Payne kept detailed records of his mileage to and from each painting
job. The average operating cost per mile for his van is $0.70. He found a $30 receipt in his van for a
metropolitan map that he purchased in April. He uses the map as part of a contact file for referral work
and for bids that he has made on potential jobs. He also had $30 in receipts for bridge tolls ($2 per trip)
for a painting job he did across the river.
Near the end of April, Payne decided to go camping, and he turned down a job on which he had bid
$6,000. He called the homeowner long distance (at a cost of $3.20) to explain his reasons for declining
the job.
Using the following headings, indicate how to classify each of the April costs incurred by Payne. Assume
that the cost object is a house-painting job.
Type of Cost Variable Fixed Direct Indirect Period Product
Paint X X X
Mineral Spirits X X X
Brushes X X X
Coveralls X X X
Advertisement X X X
Paid assistant X X X
Average
Operating cost
per mile for
Payne’s Van
X X X
Metropolitan
Map
X X X
Bridge tolls X X X
Long distance
call
X X X
