order to have room for expansion when needed Since the compa

order to have room for expansion when needed. Since the company had no immediate need for the extra building itself to manufacture a new product. per Advertising costs for the new product will total $28,000 per year. Costs of shipping the new product to customers will be $7 per unit. Electrical costs of operating machines will be $4 per unit. 2 To have funds to purchase materials, meet payrolls, and so forth, the company will have to liquidate some temporary investments. These investments are yielding a return of $5,000 per year Listed below are different costs associated with the new product decision. Choose Yes or No under each heading that helps to describe the type of cost involved Period (Selling and Opportunity Sunk 6 Direct Manufacturing Administrative) Cost 5 Rental revenue forgone, $35,000 per year Direct materials cost, $50 per unit Supervisor\'s salary, $3,000 per month Direct labour cost, $22 per unit Rental cost of warehouse, $1,500 per month Rental cost of equipment, $2,200 per month Depreciation of the building, $7,000 per year Return earned on investments, $5,000 per year

Solution

Solution:

Name of the Cost	Variable Cost	Fixed Cost	Product Cost	Period (Selling & Administrative Cost)	Opportunity Cost	Sunk Cost
Direct Materials	Direct Labors	Manufacturing Overhead
Rental Revenue Forgone, $35,000 per year	No	Yes	No	No	No	No	Yes	No
Direct Material Cost, $50 per unit	Yes	No	Yes	No	No	No	No	No
Supervisor\'s Salary, $3,000 per month	No	Yes	No	No	Yes	No	No	No
Direct Labor Cost, $22 per unit	Yes	No	No	Yes	No	No	No	No
Rental Cost of Warehouse, $1,500 per month	No	Yes	No	No	No	Yes	No	No
Rental Cost of equipment, $2,200 per month	No	Yes	No	No	Yes	No	No	No
Depreciation for building, $7,000 per year	No	Yes	No	No	Yes	No	No	Yes
Advertising Cost, $28,000 per year	No	Yes	No	No	No	Yes	No	No
Shipping Cost, $7 per unit	Yes	No	No	No	No	Yes	No	No
Electrical Cost, $4 per unit	Yes	No	No	No	Yes	No	No	No
Return earned on investment, $5,000 per year	No	Yes	No	No	No	No	Yes	No