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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.

  1. 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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