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Product Cost Paper

The wages of the company’s bookkeeper: administrative cost. 7. Sales commissions paid to the company’s salespeople: marketing and selling cost. 8. Depreciation on power tools: manufacturing overhead cost. Exercise 2-2 (15 minutes) Product Cost Period The cost of the memory chips used in a radar set Factory heating costs Factory equipment maintenance costs Training costs for new administrative employees The cost Of the solder that is used in assembling the radar sets X The travel costs of the company’s salesperson Wages and salaries factory security personnel The cost of air-conditioning executive offices

Wages and salaries in the department that handles billing customers Depreciation on the equipment in the fitness room used by factory workers X Telephone expenses incurred by factory management The costs of shipping completed radar sets to customers The wages of the workers who assemble the radar sets 14.

The presidents salary Health insurance premiums for factory personnel Exercise 2-3 (IS minutes) Cups of Coffee Served in a Week Fixed cost 51,100 $1,100 Variable cost 468 Total cost $1,568 51,594 $1,620 Average cost per cup served* 50. 871 so. 839 50. 10 * Total cost cups of coffee served in a week 2. The average cost of a cup of coffee declines as the number of cups of coffee served increases because the fixed cost is spread over more cups of coffee.

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Exercise 24 (20 minutes) Occupancy-Days Electrical Costs High activity level (August) 3,608 $8,111 Low activity level (October) 1,712 Change 3,422 56,399 Variable cost = Change in cost* Change in activity = $6,399 * 3. 422 occupancy-days $1. 87 per occupancy-day Total cost (August) Variable cost element ($1. 87 per occupancy-day x 3,608 occupancy-days) 6,747 Fixed cost element 51,3; 2.

Electrical costs may reflect seasonal factors other than just the variation in occupancy days. For example, common areas such as the reception area must be lighted for longer periods during the Winter. This Will result in seasonal effects on the fixed electrical costs. Additionally, fixed costs Will be affected by how many days are in a month. In other words, costs like the costs of lighting common areas are variable with respect to the number Of days in the month, but are fixed With respect to how many rooms are occupied during the month.

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