Carla Smith is an engineer working for a Tools Manufacturing company earning $80,000 a year salary and happy with her job. But always wanted to do something for her own and had a passion for building new things and after couple of months testing has invented a new design for roof rakes (for snow). Carla believes that her new product will have a huge success and has decided to leave her job and go into producing and selling her new invention of the roof rakes through her new company, Winter Heaven Accessories. Carla found factory space with suitable equipment that will be used to produce the new product. The rent for the factory space will be $4,000 per month and rent for equipment will be $1,000 per month.

The materials for each roof rake will cost $90. She will hire production employees to make the roof rakes and that cost $14 for each completed unit. There will be other manufacturing cost for $12 per unit. Carla will rent a small suite in an office space for use as her sales office and the office rent will be $1,700 per month. She will hire a part-time purchasing agent to search for low-cost sources of materials (steel and clips) used in the making of the roof rakes and the agent will paid a salary of $3,200 per month. She has bought a new phone for use in the business at a monthly cost of $80. In addition, Carla has added voice message system to her cellphone plan to get after-hours messages from customers. The voice messaging will cost an extra increase in Carlas monthly cellphone bill by $12.

Carla has always used a money market mutual fund to invest her savings, in which she is earning an average of $19,900 per year. The business requires an up-front cash investment and Carla will use the savings balance in the business as capital. To promote her new product, she will pay for a 1 minute commercial on a radio station to be played over a 6 month period. The radio commercial will cost $800 per month to air. It will also coat $600 to create the radio commercial. In addition, she will pay a sales commission of $15 for each rake sold. No salary will be taken by Carla in the foreseeable future.

Required:

1. Create a table with columns labelled with appropriate cost classifications (see below). Include the relevant cost in the Description column and use an X to indicate the appropriate cost classification (note: most items belong to more than one category). You may use an Excel Sheet to create the following table.

Period

Product Cost

Description of Cost item and ($) amount

Variable Cost

Fixed Cost

Direct Materials

Direct Labour

Manufg.

Overhead

(Indirect)

Selling & Admin.

Opportunity Cost

Sunk Cost