’s Glassworks produces 10,000 units, then total
inventoriable cost will be:
Variable cost ($3.80 × 10,000)
fixed manufacturing costs, $28,000 = total manufacturing
Average (unit) inventoriable (manufacturing) cost will be $66,000 ÷
10,000 units = $6.60 per flange
Unit total cost including both inventoriable and period costs will be
($66,000 + $10,000)
10,000 = $7.60 per flange, and Gayle
’s Glassworks will be able to sell the
flanges for less than Flora
’s price of $10 per flange
and still make a profit.
of $10 per flange:
’s Glassworks can sell at a price below $
10 per flange and still make a profit.
company earns operating income of $24,000 at a price of $10 per flange.
The company will earn
operating income as long as the price exceeds $7.60 per flange.
Inventoriable costs versus period costs.
Each of the following cost items pertains to one
of these companies: Best Buy (a merchandising-sector company), KitchenAid (a manufacturing-
sector company), and HughesNet (a service-sector company):
Cost of phones and computers available for sale in Best Buy’s electronics department
Electricity used to provide lighting for assembly-line workers at a KitchenAid manufacturing
Depreciation on HughesNet satellite equipment used to provide its services
Electricity used to provide lighting for Best Buy’s store aisles
Wages for personnel responsible for quality testing of the KitchenAid products during the
Salaries of Best Buy’s marketing personnel planning local
-newspaper advertising campaigns
Perrier mineral water purchased by HughesNet for consumption by its software engineers
Salaries of HughesNet area sales managers
Depreciation on vehicles used to transport KitchenAid products to retail stores