Kilgore Company makes and sells a single product Kilgore inc

Kilgore Company makes and sells a single product. Kilgore incurred the following costs in its most recent fiscal year Cost Items Appearing on the Income Statement Materials cost ($7 per unit) Company president\'s salary Depreciation on manufacturing equipment Customer billing costs (1% of sales) Rental cost of manufacturing facility Advertising costs ($200,000 per year) Labor cost ($8 per unit) Sales commissions (2% of sales) Salaries of administrative personnel Shipping and handling ($0.50 per unit) Depreciation on office furniture Manufacturing supplies ($e.25 per unit) Production supervisor\'s salar Kilgore could purchase the products that it currently makes. If it purchased the items, the company would continue to sell them using its own logo, advertising program, and sales staff Required Identify each cost as relevant or irrelevant to the outsourcing decision and indicate whether the cost is fixed or variable relative to the number of products manufactured and sold Cost items Materials cost ($7 per unit) Company president\'s salary Depreciation on manufacturing equipment Customer billing costs (1% of sales) Rental cost of manufacturing facility Advertising costs ($200,000 per year) Labor cost ($8 per unit) Sales commissions (2% of sales) Salaries of administrative personnel Shipping and handling (S0.50 per unit) Depreciation on office furniture Manufacturing supplies ($0.25 per unit) Production supervisor\'s salary Relevance Behavior

Solution

1)-MATERIAL COST-RELEVANT-VARIABLE

2)-COMPANYS PRESIDENT SALARY-IRRELEVANT-FIXED

3)-DEPRICIATION ON MANUFACTURING EQUIPMENT-RELEVANT-FIXED

4)-CUSTOMER BILLING COST-IRRELEVANT-FIXED

5)-RENTAL COST OF MANUFACTURING FACILITY-IRRELEVANT-FIXED

6)-ADVERTISING COST-IRRELEVANT-FIXED

7)-LABOUR COST-RELEVANT-VARIABLE

8)-SALES COMMISSION-IRRELEVANT-FIXED

9)-SALARIES OF ADMIN PERSONNEL-IRRELEVANT-FIXED

10)-SHIPPING AND HANDLING-RELEVANT-VARIABLE

11)-DEPRICIATION ON OFFICE FURNITURE-IRRELEVANT-FIXED

12)-MANUFACTURING SUPPLIES-RELEVANT-VARIABLE

13)-PRODUCTION SUPERVISOR\'S SALARY-RELEVANT-FIXED