Accounting 2220 Zeigler - Chapter 1 & 2

Solution/Discussion: Cost Analysis Exercise for a Pizza Business

A) Cost Behavior: Will the total cost change with a change in activity level? (pg 58-62)

B) Is the cost “economically traceable” to the underlying products? (pg 13)

C) Would the cost be a “period” or “product” cost? (pg 12)

A) What is the behavior
of the cost? (Chp 2)
(will total cost chg?) / B) Is the cost “economically traceable” to Units of Product? (Chp 1) / C) Chp 1 Cost Classification
Variable Cost / Fixed
Cost / “Direct”
Cost / “Indirect”
Cost / Product or Period Cost?
Production Facility Rent / x / x / Product
Utilities for ovens and the facilities
(debatable?) / ? / ? / x / Product
Office Computer
Depreciation / x / x / ?
Pizza Equipment
Rental fees / x / x / Product
Dough, sugar, spices used / x / x / Product
Wages of pizza makers / x / x / Product
Ingredients / Toppings Cost / x / x / Product
Advertising &
Promo Costs / x / x / Period
(S,G & A)
Delivery Costs
(mileage reimburse) / x / x / Period
(S,G & A)
Liability Insurance / x / x / Period
(S,G & A)
Owner’s Salary taken from the business / x / x / Period
(S,G & A)