1. Explain the effect of a decrease in the level of activity (cost driver) on:

(i) total fixed cost

(ii) variable cost per unit of activity.

2. Refer to the following data:

Direct material used $160 000

Marketing costs $ 5 000

Indirect labour $ 6 000

Depreciation on factory equipment $ 50 000

Wages of assembly line workers $ 30 000

Factory cleaners wages $ 25 000

Depreciation of computers used in a sales department $20 000

Oil consumed by sewing machines $ 5 000

Required:

Determine each of the following costs: (list the costs under each cost category when calculating the answer).

i) Product costs (1.5 marks)

ii) Period costs (0.5 mark)