3) Cost Classification: The Lees have provided you with the following costs and relevant information that are assumed for year 20XY. Classify the costs as variable costs or fixed costs. Explain the importance of distinguishing between variable and fixed costs. If business is expected to be steady from month to month, provide a monthly budget based on these figures.

Advertising Fees = $4,000

Labor = $400/month

One part-time employee will be hired to take care of packaging and shipping. This employee will be paid $10 per hour. He or she is estimated to work 40 hours total per month.

Packaging Supplies = $3,000

Office Supplies = $800

Phone and Internet Service = $115/month

Product Supplies = $9,000

Shipping Fees = $1,000/month

Conference Exhibitor Fee = $3,000

Travel Expenses for Conference (e.g. airfare, meals, taxi) = $1,200

Utilities for the Home Workshop = $105/month

5) Budget Preparation: The Lees believe that their production could quadruple in one month after being on Shark Tank. They want to be prepared for this. Based on the monthly budget calculated above, create a new monthly budget for quadrupled production. Assume that 70 units were produced in the first budget and 280 units will be produced per month with the new budget.

7) Break-Even Analysis: You have been asked to calculate how many units need to be sold to break even, based on the costs provided in task #3. Assume that only one conference will be attended and the estimated expenses associated with this conference are on target. Also, assume that the value for total units per year is based on sales of 70 units per month. Therefore total units sold per year are 840. The selling price per unit is $79.