A company produces chairs. The cost per chair is:

Materials$20.00

Hardware$0.50

Decorations$6.00

Shipping and handling$10.00

Each worker earns $32,000 annually in salary and benefits. The number of workers changes based on the level of production. This means this is a variable cost.

The artist who creates the designs on the chairs is paid $12,000 annually. Senior management are paid a total of $400,000 annually. Other annual costs are:

Taxes and Insurance$20,000

Utilities$45,000

Rent$126,000

Miscellaneous Overhead Expenses$14,000

The following production is possible:

No. Of Workers

0

1

2

3

4

5

6

7

No. Of Chairs that can be made

0

10,000

22,000

30,000

42,000

75,000

85,000

75,000

1.Using all this information complete the following table and answer the questions. It would be easier if you set this up in an Excel spreadsheet. When you are done, you must submit it as a Word document with your answers. You will use this table to answer questions 2 and 3.(4 marks)

Your first step is to identify which are fixed costs and which are variable costs. If you will have to keep paying the cost whether you produce 0 units of the product or 10,000 units, then it is a fixed cost. In the short run you have to keep paying it. In the long run you may be able to change these fixed costs. A variable cost changes based on how much of the product you produce. But the variable costs may not change all at the same time. Remember there is a sample assignment in Module 9. This would give you some practice before completing this assignment that will be marked