Question

Kersten Company makes and sells a toy plane. Kersten incurred the following costs in its most recent fiscal year:
Cost Items Reported on Income Statement
Shipping and handling costs ($0.75 per unit)
Cost of renting the administrative building
Utility costs for the manufacturing plant ($0.25 per unit produced)
Manufacturing plant manager’s salary
Materials costs ($4 per unit produced)
Real estate taxes on the manufacturing plant
Depreciation on manufacturing equipment
Packaging cost ($1 per unit produced)
Wages of the plant security guard
Costs of TV commercials
Labor costs ($3 per unit)
Sales commissions (1% of sales)
Sales manager’s salary
Kersten could purchase the toy planes from a supplier. If it did, the company would continue to sell them using its own logo, advertising program, and sales staff.

Required
Identify each cost as relevant or irrelevant to the outsourcing decision and indicate whether the cost is fixed or variable relative to the number of toy planes manufactured and sold.



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  • CreatedFebruary 07, 2014
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