Stanley Company makes and sells a single product. Stanley incurred the following costs in its most recent
Question:
Stanley Company makes and sells a single product. Stanley incurred the following costs in its most recent fiscal year.
Cost Items Appearing on the Income Statement
Materials cost ($10 per unit)………………………..Sales commissions (2% of sales)
Company president’s salary…………………………Salaries of administrative personnel
Depreciation on manufacturing equipment………….Shipping and handling ($0.50 per unit)
Customer billing costs (1% of sales)………………..Depreciation on office furniture
Sental cost of manufacturing facility……………….Manufacturing supplies ($0.25 per unit)
Advertising costs ($200,000 per year)…..................Productiion supervisor’s salary
Labor cost ($8 per unit
Stanley could purchase the products that it currently makes. If it purchased the items, the compay 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 or products manufactured and sold.
Fundamentals of Financial Management
ISBN: 978-0324664553
Concise 6th Edition
Authors: Eugene F. Brigham, Joel F. Houston