Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
145. What is the total amount of the costs listed above that are direct costs of the Shoe
Department?
146. What is the total amount of the costs listed above that are NOT direct costs of the
Brentwood Store?
147. In making the decision to buy the model 240 machine rather than the model 370 machine,
the sunk cost was:
148. In making the decision to buy the model 240 machine rather than the model 370 machine,
the differential cost was:
149. In making the decision to invest in the model 240 machine, the opportunity cost was:
150. In making the decision to buy the model 230 machine rather than the model 330 machine,
the differential cost was:
151. In making the decision to buy the model 230 machine rather than the model 330 machine,
the sunk cost was:
152. In making the decision to invest in the model 230 machine, the opportunity cost was:
2-129
153. Bill Pope has developed a new device that is so exciting he is considering quitting his job
in order to produce and market it on a large-scale basis. Bill will rent a garage for $300 per month
for production purposes. Utilities will cost $40 per month. Bill has already taken an industrial
design course at the local community college to help prepare for this venture. The course cost
$300. Bill will rent production equipment at a monthly cost of $800. He estimates the material
cost per unit will be $5, and the labor cost will be $3. He will hire workers and spend his time
promoting the product. To do this he will quit his job which pays $3,000 per month. Advertising
and promotion will cost $900 per month.
Required:
Complete the chart below by placing an "X" under each heading that helps to identify the cost
involved. There can be "Xs" placed under more than one heading for a single cost, e.g., a cost
might be a sunk cost, an overhead cost and a product cost; there would be an "X" placed under
each of these headings opposite the cost.
2-131
154. Laco Company acquired its factory building about 20 years ago. For a number of years
the company has rented out a small, unused part of the building. The renter's lease will expire
soon. Rather than renewing the lease, Laco Company is considering using the space itself to
manufacture a new product. Under this option, the unused space will continue to be depreciated
on a straight-line basis, as in past years.
Direct materials and direct labor cost for the new product would be $50 per unit. In order to have
a place to store finished units of the new product, the company would have to rent a small
warehouse nearby. The rental cost would be $2,000 per month. It would cost the company an
additional $4,000 each month to advertise the new product. A new production supervisor would
be hired to oversee production of the new product who would be paid $3,000 per month. The
company would pay a sales commission of $10 for each unit of product that is sold.
Required:
Complete the chart below by placing an "X" under each column heading that helps to identify the
costs listed to the left. There can be "X's" placed under more than one heading for a single cost.
For example, a cost might be a product cost, an opportunity cost, and a sunk cost; there would be
an "X" placed under each of these headings on the answer sheet opposite the cost.
2-133
155. Lettman Corporation has provided the following partial listing of costs incurred during
November:
Required:
a. What is the total amount of product cost listed above? Show your work.
b. What is the total amount of period cost listed above? Show your work.
2-134
156. A partial listing of costs incurred at Starr Corporation during June appears below:
Required:
a. What is the total amount of product cost listed above? Show your work.
b. What is the total amount of period cost listed above? Show your work.
157. The following information summarizes the company's cost structure:
Required:
Estimate the following costs at the 40,000 unit level of activity:
a. Total variable cost.
b. Total fixed cost.
c. Variable cost per unit.
d. Fixed cost per unit.
