Caleb Construction (CC) incurs supervisor salaries expense in the construction of homes. If CC manufactures 100 homes in a year, fixed supervisor salaries will be $400,000. With the current construction supervisors, CC's productive capacity is 150 homes in a year. However, if CC is contracts to build more than 150 homes per year, it will need to hire additional supervisors, which are hired as full-time rather than temporary employees. CC's productive capacity would then become 200 homes per year, and salaries expense would increase to $470,000.
How would CC's salaries expense be properly classified?

Question

Quizplus · Accepted Answer

Cost are fixed within given ranges, but vary according to total production.

Caleb Construction (CC) Incurs Supervisor Salaries Expense in the Construction