a. Continue to assume that 7,800 t-shirts will be made and sold in the first year. What is your product cost per unit under absorption costing? What is your product cost per unit under variable costing?
Per Unit Cost (Variabla) Business Costs Product or Period Cost Variable or Fixed Cost Annual Cost (Fixed) 10,000 $3,600 Artist contract Product Artist-design fee Computer/Printer Computer/Printer Depreciation Computer/Printer Depreciation- Computer/Printer Depreciation Heat Press Machine Heat Press Machine $300x 12 designs One-time startup costs not included in annual expenses One-time startup costs not included in annual expenses $5400 less residual value (S0)/3 yrs $1800 $600 less residual value (SO) / 3 years-3200 $4500 less residual value (SO) / 3 years-S1500 One-time startup costs not included in annual expenses Fixed Period Fixed $1,800 $200 $1,500 $4,500 $3,600 $27,000 Period Product Liability Insurance Mall Rent Mall Rent Owners (shared) Parties Storage Unit Inkjet Cartridges Inkjet Cartridges Laser Paper Student Workers (3) Student Workers (3) T-shirts Transfer Paper Wrapping Paper/Box 90% Product Fixed Fixed Fixed $2250 per month x 12 mos 096 Penod $250 per month x 12 mos Period (S/A) Period Product $12,000 $4,000 $1,500 $1000 per quarter x 4 qtrs $125 per month x 12 mos $50/500 prints = S0.10/print 1 print per shirt flyer print $0.10, print one every 5 shirts, so $0.10/5 $0.02 1 flyer paper $0.10, print one every 5 shirts, so $0.10/5 $0.02 $8.00/10 shirts $0.30 per shirt (DL $8/hr, make 10 shirts per hour) $8.00/20 shirts = $0.40 per shirt (DL $8/hr, fold 20 shirts per hour) Variable Variable Variable 10 Period Period 0.02 Product (Transfer) Variable Period (Folding/Wrapping) Variable Variable Variable Variable 75 Product $400/1000 sheets = S0.40/sheet 1 transfer paper per shirt Period Fixed [a)- Variable (b)- $68,200 5.69 Artist contract+ Artist design fee Printer Depreciation+ Heat Press Depreciation + Liability Insurance+Mall Rent (both)+ Owners token salary+ Parties+Storage Unit) (Inkjet cartridges (both)Laser Paper Workers (both)T-shirtsTransfer PaperWrapping Paper/Box) Y = 68,200 + 5.69x Y 68,200+5.69 (7800) 112,582.00 total mixed costs 117,000.00 15 x 7800 shirts Total Revenue at $15/shirt Net Profit @ $15/shirt $4,418.00 (117000-112582) Per Unit Cost (Variabla) Business Costs Product or Period Cost Variable or Fixed Cost Annual Cost (Fixed) 10,000 $3,600 Artist contract Product Artist-design fee Computer/Printer Computer/Printer Depreciation Computer/Printer Depreciation- Computer/Printer Depreciation Heat Press Machine Heat Press Machine $300x 12 designs One-time startup costs not included in annual expenses One-time startup costs not included in annual expenses $5400 less residual value (S0)/3 yrs $1800 $600 less residual value (SO) / 3 years-3200 $4500 less residual value (SO) / 3 years-S1500 One-time startup costs not included in annual expenses Fixed Period Fixed $1,800 $200 $1,500 $4,500 $3,600 $27,000 Period Product Liability Insurance Mall Rent Mall Rent Owners (shared) Parties Storage Unit Inkjet Cartridges Inkjet Cartridges Laser Paper Student Workers (3) Student Workers (3) T-shirts Transfer Paper Wrapping Paper/Box 90% Product Fixed Fixed Fixed $2250 per month x 12 mos 096 Penod $250 per month x 12 mos Period (S/A) Period Product $12,000 $4,000 $1,500 $1000 per quarter x 4 qtrs $125 per month x 12 mos $50/500 prints = S0.10/print 1 print per shirt flyer print $0.10, print one every 5 shirts, so $0.10/5 $0.02 1 flyer paper $0.10, print one every 5 shirts, so $0.10/5 $0.02 $8.00/10 shirts $0.30 per shirt (DL $8/hr, make 10 shirts per hour) $8.00/20 shirts = $0.40 per shirt (DL $8/hr, fold 20 shirts per hour) Variable Variable Variable 10 Period Period 0.02 Product (Transfer) Variable Period (Folding/Wrapping) Variable Variable Variable Variable 75 Product $400/1000 sheets = S0.40/sheet 1 transfer paper per shirt Period Fixed [a)- Variable (b)- $68,200 5.69 Artist contract+ Artist design fee Printer Depreciation+ Heat Press Depreciation + Liability Insurance+Mall Rent (both)+ Owners token salary+ Parties+Storage Unit) (Inkjet cartridges (both)Laser Paper Workers (both)T-shirtsTransfer PaperWrapping Paper/Box) Y = 68,200 + 5.69x Y 68,200+5.69 (7800) 112,582.00 total mixed costs 117,000.00 15 x 7800 shirts Total Revenue at $15/shirt Net Profit @ $15/shirt $4,418.00 (117000-112582)
