Erin Mikell, Inc. acquired its factory building about ten years ago and has been

Question

Erin Mikell, Inc. acquired its factory building about ten years ago and has been leasing an annex in the rear of the building. It has received a rental income of $30,000 annually. The lease is about to expire and Erin Mikell is considering not renewing the lease, but using the space for production of a new product. Materials used in the production of the new product will be $80 per unit. The company will rent, for $500 per month, a small warehouse to store finished products. The company will rent equipment to use in the manufacturing process for $4,000 per month. Workers will be hired for production at $60 per unit. The annex will continue to be depreciated using straight-line depreciation at $8,000 per year. A supervisor will be hired at $1,500 per month. Advertising for the new product will total $50,000 per year. Costs of shipping the new product to customers will be $9 per unit and electricity to run the machinery will be $1.20 per unit. Using the following headings, identify the different costs associated with the new product decision as to what type of cost they represent. It is possible for a particular cost to be identified with more than one heading.

Explanation / Answer

material used : Variable cost, Direct material,Prime cost

Rent(ware house): Period cost, Manufacturing overhead,fixed cost,conversion cost,

Rent (Equipment):Sunk cost,Manufacturing overhead,fixed cost,conversion cost

Workers: Variable cost, Direct labor,prime cost,conversion cost

Supervisor:Manufacturing overhead,fixed cost,conversion cost,period cost

Advertising(per year):period cost,Sunk cost

Cost of shipping (per unit): Variable cost,

Electricity(Per unit):Variable cost,conversion cost

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.