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LN02-ch02-solutions-selfstudy-AFM102s08

LN02-ch02-solutions-selfstudy-AFM102s08 - Problem 219 1...

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Problem 2-19 1. Product Cost Period  (sellin Name of the Cost Vari able  Cos t Fixe Cost Direct  Materi- als Direct  La- bour Mfg.  Over- head and  ad- min)  Cost Oppor- tunity  Cost Sunk  Cost Staci's current salary, $3,800 per  month ............................................ X X Building rent, $500 per month .......... X X Clay and glaze, $2 per pot ............... X X Wages of production workers, $8  per pot ........................................... X X Advertising, $600 per month ............ X X Sales commission, $4 per pot .......... X X Rent of production equipment, $300  per month ...................................... X X Legal and filing fees, $500 ............... X X X Rent of sales office, $250 per  month ............................................ X X Phone for taking orders, $40 per  month ............................................ X X Recording device added to phone X X Interest lost on savings account,  X X page 1 of 4
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$1,200 per year ............................. page 2 of 4
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2. The $500 cost of incorporating the business is not a differential cost. Even though the cost was  incurred to start the business, it is a sunk cost. Whether Staci produces pottery or stays in her present  job, she will have incurred this cost.
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