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Bill Pope has developed a device that is so exciting he is considering quitting his job to produce and market it on a large-scale basis.
- Bill Pope has developed a device that is so exciting he is considering quitting his job to produce and market it on a large-scale basis. Bill will rent a garage for $300 per month for production purposes. Utilities will cost $40 per month. Bill has already taken an industrial design course at the local community college to help prepare for this venture. The course cost $300. Bill will rent production equipment at a monthly cost of $800. He estimates the material cost will be $5 per unit, and the labour cost will be $3 per unit. He will hire workers and spend his time promoting the product. To do this, he will quit his job, which pays $3,000 per month. Advertising and promotion will cost $900 per month. Required: Complete the chart below by placing an "X" under each heading that helps to identify the cost involved. You can place an "X" under more than one heading for a single cost: for example, a cost may be a sunk cost, an overhead cost, and a product cost; you would place an "X" under each of these headings opposite the cost. *Betweenthealternativesofgoingintobusinesstomakethedeviceornotgoingintobusinesstomakethedeviceandcontinuewithhisjob..Seecolumnheading"DifferentialCost".
Opportunity Cost | Sunk Cost | Variable Cost | Fixed Cost | Mfg. Overhead | Product Cost | Selling Cost | Differential Cost | |
Garage rent | ||||||||
Utilities | ||||||||
Cost of the industrial design course | ||||||||
Equipment rented | ||||||||
Material cost | ||||||||
Labour cost | ||||||||
Present salary | ||||||||
Advertising |
* Between the alternatives of going into business to make the device or not going into business to make the device.
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