Staci Valek began dabbling in pottery several years ago as a hobby. Her work is quite creative, and it has been so popular with friends and others that she has decided to quit her job with an aerospace company and manufacture pottery full time. The salary from Staci's aerospace job is \($3,800\) per month.
Staci will rent a small building near her home for \($500\) per month to use as a place for manufacturing the pottery. She estimates that the cost of clay and glaze will be \($2\) for each finished piece of pottery. She will hire workers to produce the pottery at a labor rate of \($8\) per pot. To sell her pots, Staci feels that she must advertise heavily in the local area. An advertising agency states that it will handle all advertising for a fee of \($600\) per month. Staci's brother will sell the pots; he will be paid a commission of \($4\) for each pot sold. Equipment needed to manufacture the pots will be rented at a cost of \($300\) per month.
Staci has already paid the legal and filing fees associated with incorporating her business in the state.
These fees amounted to \($500.\) A small room has been located in a tourist area that Staci will use as a sales office. The rent will be \($250\) per month. A phone installed in the room for taking orders will cost \($40\) per month. In addition, a recording device will be attached to the phone for taking after-hours messages.
St.ici has some money in savings that is earning interest of $ 1 ,200 per year. These savings will be withdrawn and used to get the business going. For the time being, Staci does not intend to draw any salary from the new company.
Required:
1 . Prepare an answer sheet with the following column headings:

List the different costs associated with the new company down the extreme left column (under Name of the Cost). Then place an Sunder each heading that helps to describe the type of cost involved.
There may be X"s under several column headings for a single cost. (That is, a cost may be a fixed cost, a period cost, and a sunk cost; thus you would place an X under each of these column headings opposite the cost.)
Under the Variable Cost column, list only those costs that would be variable with respect to the number of units of pottery that are produced and sold.
2. All of the costs you have listed above, except one, would be differential costs between the alternatives of Staci producing pottery or staying with the aerospace company. Which cost is not differential?
Explain.

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Product Cost Name Direct Direct Cost Cost Materials Labor of the Variable Fixed Cost Manufacturing Overhead Period (selling and administrative) Opportunity Sunk Cost Cost Cost