Question

Listed below are costs of providing an airline service. Classify each cost as (a) either variable (V) or fixed (F), and (b) either direct (D) or indirect (I). Consider the cost object to be a flight. Flight attendants and pilots are paid based on hours of flight time.

Cost	a. Variable or Fixed	b. Direct or Indirect
1. Advertising
2. Beverages and snacks
3. Regional vice president salary
4. Depreciation (straight-line) on ground equipment
5. Fuel and oil used in planes
6. Flight attendant wages
7. Pilot wages
8. Aircraft maintenance manager salary
9. Customer service salaries

Short answer

Cost	a. Variable or Fixed	b. Direct or Indirect
1. Advertising	Fixed	Direct
2. Beverages and snacks	Variable	Indirect
3. Regional vice president salary	Fixed	Indirect
4. Depreciation (straight-line) on ground equipment	Fixed	Indirect
5. Fuel and oil used in planes	Variable	Direct
6. Flight attendant wages	Variable	Direct
7. Pilot wages	Variable	Direct
8. Aircraft maintenance manager salary	Fixed	Indirect
9. Customer service salaries	Fixed	Indirect

Step-by-step solution

Definition of Salary Expenses

Salaries expenses are the cost incurred by the business for paying the compensation to the employees working in direct or indirect business operations.

Step 2:Classification of cost

1. Advertising cost: It is classified as a fixed cost because it is not incurred in relation to the number of passengers. It is an indirect cost because it is related to the promotion of the airlines.
2. Beverages and snacks: This cost is variable because the amount of beverages and snacks depends upon the number of passengers travelling on the airlines. It is an indirect cost because it is not directly attached to the airline’s operations.
3. Regional vice president salary: It is a fixed cost because the president salary is provided even when the number of passengers is 0. Also, it is indirect because it is related to administration and not directly related to flight.
4. Depreciation (straight-line) on ground equipment: It is a fixed expense charged on the assets without considering the activity level or the number of passengers. It is indirect because it is charged over the ground equipment, not on the aircraft.
5. Fuel and oil used in planes: This is a variable cost because the cost of fuel and oil depends upon the distance travelled by aircraft. Also, it is a direct cost because it is attached to the aircraft itself.
6. Flight attendant wages: Wages paid to the flight attendant are a variable expense because it depends upon the number of hours they worked on the flight. It is classified as direct cost because the attendant will provide services in the operations of the aircraft.
7. Pilot wages: Wages paid to the pilot are variable expenses because they are paid based on the number of hours in the flight. It is classified as direct because it is directly attached to the operation of the flight.
8. Aircraft maintenance manager’s salary: It is a fixed expense because it is incurred for maintaining the aircraft and is not related to the number of passengers. It is an indirect cost as it is not directly engaged with the aircraft.
9. Customer service salaries: It is a fixed expense because these salaries are to be paid even when the number of passengers is 0. It is indirect because it does not directly relate to operating the aircraft.