1.13 114 115 116 17 Part C (30 marks) Cost Concepts and Classifications Jamal has a garage that was constructed at a cost of $8,000 several years ago. Jamal decided to produce and sell surfboards in his spare time. Accordingly he can use the garage for construction purposes. The garage will be depreciated over a 20-year life. Jamal has determined that each surfboard will require $60 in wood. He will hire students to do most of the work and pay them $70 for each surfboard completed. He will rent tools at a cost of $400 per month. Jamal has drawn money out of savings to provide the capital needed to get the operation going. The savings were earning interest at 6 percent annually. An advertising agency will handle advertising at a cost of $200 per month. Jamal will hire students to sell the surfboard and pay a commission of $40 per board. Part C (30 marks) Cost Concepts and Classifications Jamal has a garage that was constructed at a cost of $8,000 several years ago. Jamal decided to produce and sell surfboards in his spare time. Accordingly he can use the garage for construction purposes. The garage will be depreciated over a 20-year life. Jamal has determined that each surfboard will require 560 in wood. He will hire students to do most of the work and pay them $70 for each surfboard completed. He will rent tools at a cost of $400 per month Jamal has drawn money out of savings to provide the capital needed to get the operation going. The savings were caming interest at 6 percent annually. An advertising agency will handle advertising at a cost of $200 per month. Jamal will hire students to sell the surfboard and pay a commission of S40 per board. Required: From the foregoing information above text, identify all the examples you can of the following types of costs (a single item may be identified as more than one type of cost)-use a table: Cost Item Your Answer Variable cost ( 4 marks) Fixed cost ( 4 marks) Selling or administrative cost ( 4 marks) Product cost ( 4 marks) Manufacturing overlead cost ( 4 marks) Sunk cost ( 4 marks) Opportunity cost ( 4 marks) Differential cost (between the alternatives of producing or not producing surfboard) 2 marks) 1.13 114 115 116 17 Part C (30 marks) Cost Concepts and Classifications Jamal has a garage that was constructed at a cost of $8,000 several years ago. Jamal decided to produce and sell surfboards in his spare time. Accordingly he can use the garage for construction purposes. The garage will be depreciated over a 20-year life. Jamal has determined that each surfboard will require $60 in wood. He will hire students to do most of the work and pay them $70 for each surfboard completed. He will rent tools at a cost of $400 per month. Jamal has drawn money out of savings to provide the capital needed to get the operation going. The savings were earning interest at 6 percent annually. An advertising agency will handle advertising at a cost of $200 per month. Jamal will hire students to sell the surfboard and pay a commission of $40 per board. Part C (30 marks) Cost Concepts and Classifications Jamal has a garage that was constructed at a cost of $8,000 several years ago. Jamal decided to produce and sell surfboards in his spare time. Accordingly he can use the garage for construction purposes. The garage will be depreciated over a 20-year life. Jamal has determined that each surfboard will require 560 in wood. He will hire students to do most of the work and pay them $70 for each surfboard completed. He will rent tools at a cost of $400 per month Jamal has drawn money out of savings to provide the capital needed to get the operation going. The savings were caming interest at 6 percent annually. An advertising agency will handle advertising at a cost of $200 per month. Jamal will hire students to sell the surfboard and pay a commission of S40 per board. Required: From the foregoing information above text, identify all the examples you can of the following types of costs (a single item may be identified as more than one type of cost)-use a table: Cost Item Your Answer Variable cost ( 4 marks) Fixed cost ( 4 marks) Selling or administrative cost ( 4 marks) Product cost ( 4 marks) Manufacturing overlead cost ( 4 marks) Sunk cost ( 4 marks) Opportunity cost ( 4 marks) Differential cost (between the alternatives of producing or not producing surfboard) 2 marks)
