Ch1 Problem - Cost Classifications Complete the problem by hand by putting X's in the correct...

Transcribed Image Text:

Ch1 Problem - Cost Classifications Complete the problem by hand by putting X's in the correct columns and answering the second question. You may download this document, fill it out, and then scan and submit as a pdf rather than rewriting everything in the table. 1. Marek is considering whether to produce and sell classic wooden surfboards in his spare time. He has a garage that was constructed at a cost of $12,000 several years ago, and which could be used for production purposes. The garage would be depreciated over a 20-year life. Marek has determined that each surfboard will require $60 in wood. He would hire students to do most of the work and pay them $45 for each surfboard completed. He would rent tools at a cost of $400 per month. Marek will draw money from his savings account to finance getting the business going. His savings is currently earning 3% interest. He will hire an advertising agency $500 per month to handle marketing his surfboards. Marek would hire students to sell the surfboards and pay a commission of $20 per board sold. Based on this information, classify the following costs. For variable costs remember to focus on whether the cost varies based on the number of products produced and sold. A differential cost is based on whether he starts the business or does not start the business. Variable Cost Fixed Cost Period Original cost of the garage Depreciation on the garage Wood for the surfboards Student workers building the surfboards Tool rental Interest on savings Advertising costs Sales Commissions Product Mfg. Overhead Sunk Cost Opportunity Cost Differential Cost Ch1 Problem - Cost Classifications Complete the problem by hand by putting X's in the correct columns and answering the second question. You may download this document, fill it out, and then scan and submit as a pdf rather than rewriting everything in the table. 1. Marek is considering whether to produce and sell classic wooden surfboards in his spare time. He has a garage that was constructed at a cost of $12,000 several years ago, and which could be used for production purposes. The garage would be depreciated over a 20-year life. Marek has determined that each surfboard will require $60 in wood. He would hire students to do most of the work and pay them $45 for each surfboard completed. He would rent tools at a cost of $400 per month. Marek will draw money from his savings account to finance getting the business going. His savings is currently earning 3% interest. He will hire an advertising agency $500 per month to handle marketing his surfboards. Marek would hire students to sell the surfboards and pay a commission of $20 per board sold. Based on this information, classify the following costs. For variable costs remember to focus on whether the cost varies based on the number of products produced and sold. A differential cost is based on whether he starts the business or does not start the business. Variable Cost Fixed Cost Period Original cost of the garage Depreciation on the garage Wood for the surfboards Student workers building the surfboards Tool rental Interest on savings Advertising costs Sales Commissions Product Mfg. Overhead Sunk Cost Opportunity Cost Differential Cost