AC239 Unit 2 Cost Classification and High-Low Example

Reviewed by Chester Goodwin, MBA Managerial Accounting Purdue University Global Free custom sample in 24 to 48h

Eighteen manufacturing and selling costs are classified by behavior, traceability and statement in this AC239 Unit 2 cost classification exercise built on Burrow Bedworks, an invented foam-and-fabric pet bed factory. Purdue Global AC 239, Managerial Accounting, asks BS in Accounting students to sort a cost list twice and split its mixed cost. Burrow Bedworks' list runs from memory foam chemicals and cover fabric through the plant supervisor's salary and factory rent to sales commissions, freight and office costs. Each line is marked variable, fixed or mixed, direct or indirect, and product or period. A highlighted note explains why commissions are variable yet period costs. Factory utilities are then split with the high-low method into $2.00 per machine hour and $2,840 a month, tested against the other months and qualified with research on sticky costs.

CourseAC239 Managerial Accounting
UnitUnit 2
Paper typeCost classification exercise
LengthAbout 570 words, 5 pages double-spaced
FormatAPA 7 student paper
SchoolPurdue University Global
ProgramBS in Accounting
UpdatedOctober 2026

Free sample paper for AC239 Unit 2

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Eighteen Costs Classified Twice and a Utility Bill Split: A Unit 2 Cost Classification Exercise for a Dog Bed Maker

[Student Name]

Purdue University Global

AC239: Managerial Accounting

Unit 2 Cost Classification Exercise

[Instructor Name]

[Date]

Burrow Bedworks, its cost list and utility data are composite; the textbook, the history of management accounting and the cost behavior study cited are real.

What this part is doingGiving the count, the two classifications and the high-low result in the lead shows the exercise covers both of its parts.
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Classification

Each line gives behavior, traceability to a bed, and where the cost goes.

1. Memory foam chemicals: variable; direct; product.

2. Cover fabric: variable; direct; product.

3. Zippers: variable; direct; product.

4. Thread and glue: variable; indirect, too small to trace; product, through overhead.

5. Sewing operators' wages: variable; direct; product.

6. Foam line operators' wages: variable; direct; product.

7. Plant supervisor's salary: fixed; indirect; product, through overhead.

8. Factory rent: fixed; indirect; product, through overhead.

9. Depreciation on foam cutters: fixed; indirect; product, through overhead.

10. Quality inspector's salary: fixed; indirect; product, through overhead.

11. Factory utilities: mixed; indirect; product, through overhead.

12. Machine maintenance contract with per-call charges: mixed; indirect; product.

13. Sales commissions: variable; not traced to production; period.

14. Freight to customers: variable; period, a selling cost.

15. Online advertising: fixed; period.

16. Office rent: fixed; period.

17. Owner's salary as president: fixed; period.

18. Accounting software subscription: fixed; period.

Sales commissions are the line most often misplaced: they rise with every bed sold, so they are variable, yet they arise from selling rather than making the bed, so they are a period cost that never enters inventory.

What this part is doingThe highlighted sentence explains the classification that combines two ideas, which is where graders look for understanding.
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Product costs attach to the beds and wait in inventory until the beds are sold; period costs are expensed when incurred (Franklin et al., 2019). Behavior and traceability are separate questions. The plant supervisor's salary is fixed and indirect, but it is still a product cost, because it is part of making beds. Getting indirect costs right matters more than it once did: as machines replaced hand labor, overhead grew into a large share of product cost, and systems that spread it crudely began to distort what products appeared to cost (Johnson & Kaplan, 1987).

Splitting the Utility Bill With High-Low

Six months of machine hours and utility cost:

1. January: 3,200 hours, $9,310.

2. February: 2,900 hours, $8,590.

3. March: 3,600 hours, $9,980.

4. April: 4,100 hours, $11,040.

5. May: 3,800 hours, $10,510.

6. June: 2,600 hours, $8,040.

High activity: April, 4,100 hours and $11,040. Low activity: June, 2,600 hours and $8,040. The method picks the months by activity, not by cost.

Variable rate: ($11,040 minus $8,040) divided by (4,100 minus 2,600) equals $3,000 divided by 1,500 hours, or $2.00 per machine hour.

Fixed portion: $11,040 minus 4,100 times $2.00 equals $11,040 minus $8,200, or $2,840 a month. Check at the low month: $2,840 plus 2,600 times $2.00 equals $8,040.

Cost formula: monthly utilities equal $2,840 plus $2.00 per machine hour.

Limits of the Formula

High-low uses only two months and ignores the other four. Checking the formula against them, it predicts $9,240 for January against an actual $9,310, and $10,440 for May against $10,510, close enough for planning. Least-squares regression, fitted through every month, would be the better tool if one of the extreme months were unusual. Research has also shown that many costs shrink more slowly in a slump than they grew on the way up, so a single straight line can mislead in a downturn (Anderson et al., 2003).

What this part is doingTesting the formula against the remaining months and naming its limits shows the student understands the method rather than only applying it.
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References

Anderson, M. C., Banker, R. D., & Janakiraman, S. N. (2003). Are selling, general, and administrative costs "sticky"? Journal of Accounting Research, 41(1), 47-63. https://doi.org/10.1111/1475-679X.00095

Franklin, M., Graybeal, P., & Cooper, D. (2019). Principles of accounting, volume 2: Managerial accounting. OpenStax. https://openstax.org/details/books/principles-managerial-accounting

Johnson, H. T., & Kaplan, R. S. (1987). Relevance lost: The rise and fall of management accounting. Harvard Business School Press.

What the AC239 Unit 2 assignment asks for

In the second AC239 unit, students classify a cost list and separate a mixed cost. For each cost, decide its behavior, variable, fixed or mixed, whether it traces directly to a product, and whether it is a product cost that goes to inventory or a period cost expensed when incurred. Treat behavior and traceability as separate questions. Explain any line that combines categories in a surprising way. Then use the high-low method on the mixed cost: choose the highest and lowest activity periods, compute the variable rate from the change in cost over the change in activity, and find the fixed portion. Write the cost formula and check it. A note on the method's limits strengthens the answer. The finished grid and split usually fill two pages, with any textbook rule cited in APA 7.

Inside the AC239 Unit 2 example

The sample lists eighteen costs, each with its behavior, traceability and destination. Foam, fabric, zippers and sewing labor are variable direct product costs. Thread is variable but indirect. The supervisor's salary, rent, depreciation and the inspector's salary are fixed indirect product costs. Utilities and the maintenance contract are mixed. Commissions, freight, advertising, office rent, the owner's salary and software are period costs. The highlighted sentence explains the commission classification, and a paragraph cites the textbook and the history of overhead growth. The high-low block lists six months, picks April and June by activity, computes $2.00 an hour and $2,840 fixed, and checks two other months before discussing regression and sticky costs.

AC239 Unit 2 rubric: what earns full points

Classification exercises are graded on correct marks for every line. Behavior and traceability are scored separately, so a cost placed in the right behavior column but the wrong traceability column loses points. Product versus period is checked closely for selling costs and factory overhead. The high-low computation must pick months by activity, not by cost, and produce the correct rate and fixed portion. A cost formula and a check earn credit. Discussing the method's limits shows understanding. Clear layout lets graders scan the grid quickly. The last points go to correct APA 7 citations, and graders also check that the high-low months named in the text match the data table.

Common AC239 Unit 2 mistakes, and how to avoid them

The most common classification error is calling every selling cost fixed or every factory cost variable. Others treat traceability as the same thing as behavior. Commissions are often placed in product costs. Factory rent is called a period cost because it is fixed. In high-low, students pick the months with the highest and lowest costs instead of activity. The fixed portion is computed from the wrong month. The formula is never checked. If your cost list is long or your mixed cost data are messy, our team can classify the list and split the cost from your problem.

Get an AC239 Unit 2 example written to your instructions

Classification turns on the cost list and activity data in the Unit 2 problem, so send those with the rubric and any format instructions. Each line gets a verdict, with footnotes where the facts decide it, and the high-low block is worked on your months. Expect it in 24-48h; the first custom sample is free. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.

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AC239 Unit 2 questions, answered

Is direct labor always a variable cost?

In most AC239 problems it is treated as variable, since hours rise and fall with output. Some problems describe a workforce paid a fixed salary regardless of volume, and then direct labor is fixed while remaining direct. The sample follows the problem's facts and footnotes the line whenever the classification departs from the usual assumption, which is where graders look for reasoning.

Why use high-low when regression is more accurate?

Because the unit is testing whether the idea of separating a mixed cost is understood, and high-low shows the idea with two data points and simple arithmetic. It ignores every other month, which is its weakness, and a sentence noting that limitation often earns credit. Sections that assign regression or a scatter plot instead get that method in the same block.

What does product versus period mean for a service business?

A service firm holds no inventory, so every cost goes to the income statement in the period incurred and the distinction mostly disappears. Traceability still matters, though: a law firm's paralegal hours trace to a client matter, and office rent does not. When an AC239 problem uses a service business, the sample replaces the product column with a client or job column.

Where can I find a free AC239 Unit 2 sample paper?

You can read a complete AC239 Unit 2 cost classification exercise on this page, classifying eighteen costs for a dog bed maker and splitting factory utilities with the high-low method.

What cost formula does the AC239 Unit 2 sample find?

Monthly factory utilities equal $2,840 plus $2.00 per machine hour, computed from April at 4,100 hours and June at 2,600 hours, and checked against January and May.