What types of costs are associated with a Stance™ sock vending machine located in an airport?

photo of sock vending machineAt Cleveland Hopkins International Airport in northeastern Ohio, a vending machine that dispenses socks was recently installed. Located in the C concourse, the Stance sock vending machine offers a variety of what Stance refers to as “uncommon” socks. The designs on the socks in the Cleveland airport vending machine include Cleveland Browns, Cleveland Indians, patriotic flag designs, Hawaiian tropical flowers, and others.

The machine is stocked with an assortment of socks. The airport traveler inserts a credit card, makes a sock selection in the keypad, and the socks are dispensed to the purchaser.

Stance sells its socks through retailers, at its own stores, via vending machines, and through monthly subscriptions.

Questions

  1. What costs would Stance incur related to its sock vending machine located at the Cleveland airport? Assume that Stance rents the vending machine from a vending service. Use your imagination and list as many costs as you can.
  2. Classify each of the costs you listed for Question 1 as variable, fixed, or mixed with respect to the number of units sold.
  3. Are Stance’s costs mostly variable or fixed? What impact does this cost structure have on the break even volume for Stance’s operation of that vending machine?
  4. Now classify each of the costs you listed for Question 1 as direct or indirect, assuming that the vending machine is the cost object.
  5. How would the classification of costs as direct or indirect change when the cost object shifts from the Cleveland airport sock vending machine to the overall sock product line at Stance?

Copyright 2019 Wendy M. Tietz, LLC

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About Dr. Wendy Tietz, CPA, CMA, CSCA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Education.

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