RTW Company manufactures acoustic and electric guitars. Selected costs from the most recent year of operations follow below.
1. The guitars use metal for the frets and tuning knobs that costs $10 per guitar.
2. Wages for employees who handcraft the guitars total $175 per guitar.
3. Insurance on the manufacturing facilities totals $5,000 per year.
4. Glue used in the assembly process amounts to $3 per guitar.
5. The annual depreciation cost of the machines used to cut and finish the wood used in the guitars totals $15,000.
6. The salary of the vice president of marketing is $150,000 per year.
7. The salary of the manager of manufacturing operations is $ 120,000 per year.
8. The total cost of an advertising campaign paid at the beginning of the year just ended was $75,000.
9. Instead of producing acoustic guitars, RTW Company could use the manufacturing facilities to increase production of electric guitars that would generate operating income of $100,000 per year.
10. Overtime premiums for production staff were $ 1,000 during a one-month period to meet a rush order on a specific model of guitar for a single large customer.

Required:
Prepare an answer sheet with the following column headings:

List the different costs associated with the company down the left column (under Name of the Cost). Then place an X under each heading that describes the type of cost involved. Several column headings may have an X under them for a single cost. (That is, a cost may be a fixed cost, a period cost, and a sunk cost; you would place an X under each of these column headings opposite the cost.) Under the variable cost column, list only those costs that would be variable with respect to the number of guitars that are produced and sold.

Transcribed Image Text:

Product Cost Period (Selling and Direct Manufacturing Administrative) Overhead Cost Name of Variable Fixed Direct the Cost Cost Cost Materials Labour To Units of Product Direct Indirect Opportunity Sunk Cost Cost