Question: ) GEM Ltd makes an electronic product called PIN. The relevant range of operations is between 3,500 units and 10,000 units of PIN per month.

) GEM Ltd makes an electronic product called PIN. The relevant range of operations is between 3,500 units and 10,000 units of PIN per month. Per unit costs at two activity levels are as follows: 4,000 units at $16.00 per unit; 8,000 units at $12.00 per unit.

Required:

Determine the total cost if GEM Ltd produces 10,000 units.

(2.5 marks)

ANSWER:

b) Quality Footwear incurs these costs for the month:

Production wages - $6200

Advertising costs - $ 800

Leather material used - $8000

Research costs - $4.000

Depreciation on factory equipment - $1000

Factory cleaners' wages - $ 860

Repairs and maintenance on office building - $2500

Glue and pins - $400

Required:

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

i) Product costs ii) Period costs iii) Explain why costs are classified into various cost categories, and whi benefits from it?

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