This problem allows you to apply some of what you\'ve learned to help two young entrepreneurs. shari Recently, two business students, Gerry Keating and Louise Lamont, began a parttime business making computers

designed for online gaming. They bought the various components from various suppliers and assembled the machines in Gerry\'s parents\' garage. Their only cost was $ for parts; they sold each computer for $ They

were able to make three machines per week and to sell them to fellow students. The activity was appropriately called Keating & Lamont Computers KLC The product quality was good, and as graduation approached, orders were coming in much faster than KLC could fill them. A national CPA firm made Ms Lamont an attractive offer of employment, and a large electronics company was ready to hire Mr Keating. Students and faculty at Clarkson

College, however, encouraged the two to make KLC a fulltime venture. The two students believed that the quality and price of the KLC machines would attract the college\'s bookstore to sign a contract to buy a minimum of  units the first year for $ each. The bookstore sales were likely to reach  units per year, but the store manager would not make an initial commitment beyond   The prospect of $ in annual sales for KLC caused the two young entrepreneurs to wonder about the wisdom of accepting their job offers. Before making a decision, they decided to investigate the implications of making KLC a fulltime operation. Their study

provided the following information relating to the production of their computers. Components from wholesaler $  per computer Assembly labor  per hour Manufacturing space rent  per month Utilities  per

month Janitorial services  per month Depreciation of equipment  per year Labor  hours per computer The two owners expected to devote their time to the sales and administrative aspects of the business. Required

Classify each cost item into the categories of direct materials, direct labor, and manufacturing overhead. Classify each cost item as either variable or fixed. What is the cost per computer if KLC produces  units per year?

What is the cost per unit if KLC produces  units per year? If the job offers for Mr Keating and Ms Lamont totaled $ would you recommend that they accept the offers or proceed with plans to make KLC a fulltime venture?  

Answer rating: 100% (QA)

Classification of Cost Items 1 Direct Materials 235 per computer 2 Direct Labor 145 per hour 2 hours ... View the full answer