Ender Phones, Inc. makes telephones that it sells to department stores throughout the United States. Ender is trying to decide which of two telephone models to manufacture. The company could produce either telephone with its existing machinery. Cost data pertaining to the two choices follow:
Model 90 Model 30
Materials cost per unit......................................$ 25.00...................$ 25.00
Labor cost per unit............................................27.50.....................15.00
Product design cost.....................................12,000.00..................7,000.00
Depreciation on existing manufacturing machinery..3,000.00..................3,000.00
Required
a. Identify the fixed costs and determine the amount of fixed cost for each model.
b. Identify the variable costs and determine the amount of variable cost for each model.
c. Identify the avoidable costs.