A company manufactures and retails clothing.

A company manufactures and retails clothing.

You are required to group the costs which are listed below and numbered (1) – (20) into the following classifications (each cost is intended to belong to only one classification):

Give reasons for your decision.

(i) direct materials (v) research and development costs
(ii) direct labour (vi) selling and distribution costs
(iii) direct expenses (vii) administration costs
(iv) indirect production overhead (viii) finance costs

(1) Lubricant for sewing machines
(2) Paper for general office printer
(3) Maintenance contract for general office photocopier
(4) Telephone rental plus metered calls
(5) Interest on bank overdraft
(6) Performing Rights Society charge for music broadcast throughout the factory
(7) Market research undertaken prior to a new product launch
(8) Wages of security guards for factory
(9) Carriage on purchase of basic raw material
(10) Royalty payable on number of units of product XY produced
(11) Road fund licences for delivery vehicles
(12) Parcels sent to customers
(13) Cost of advertising products on television
(14) Audit fees
(15) Chief accountant’s salary
(16) Wages of operatives in the cutting department
(17) Cost of painting advertising slogans on delivery vans
(18) Wages of storekeepers in materials store
(19) Wages of fork lift truck drivers who handle raw materials
(20) Developing a new product in the laboratory
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