1) Stoneridge charges you $2,500 rent per month, which includes utilities, telep
ID: 2486966 • Letter: 1
Question
1) Stoneridge charges you $2,500 rent per month, which includes utilities, telephone, cleaning, and maintenance. You estimated that 90% of the rent was related to factory operations and 10% was related to selling and administrative activities.
2) You will order white, cotton t-shirts from a T-shirt wholesaler. Each T-shirt costs (including taxes, shipping, and handling) $3.75 to purchase.
3) To store T-shirts that were bought, but not yet imprinted, you will rent a storage unit. The storage unit costs you $125 per month.
4) You agreed to pay your artist friend a $10,000 annual contract fee plus a $300 design fee for each of the 12 T-shirt pictures designed. This same term is renewable for the next 3 years. Each T-shirt picture will only be used for one year. Therefore, in the second year, 12 new pictures will be designed at $300 each and another $10,000 annual contract fee will be charged.
Required:
1. classify each cost as variable or fixed. Also state if each expenses is a manufacturing cost (product cost) or period cost.
Explanation / Answer
Sr. No. Variable cost Fixed cost Manufacturing cost Period cost 1) 2500 2250 250 Rent paid is a fixed charge and also since 90% of this is asscoiated with production it will be termed as manufacturing and remaining 10 % as period cost 2 3.75 3.75 Purchase cost is variable cost as it is dependent on level of operation also it is directly related to Product's cost 3 125 125 Storage unit cost is a fixed expense, and it is in direct relation to product cost 4 13600 13600 Total cost of 10000 + 300 x 12, = 13600 is a fixed cost to be paid at beginning of year this is design cost of product
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.