CHECK MY NOIR 2 25 Wollogong Group Ltd. of New South Wales, Australia, acquired its factory building 10 years ago. For several years, the company has rented out a small annex attached to the rear of the building for $30,000 per year. The renter's lease will expire toon, and rather than renewing the lease, the company has decided to use the annex to manufacture a new product Direct materials cost for the new product will total $80 per unit. To have a place to store its finished goods, the company will renta small warehouse for $500 per month in addition, the company must rent equipment for $4,000 per month to produce the new product Direct laborers will be hired and paid $60 per unit to manufacture the new product. As in prlor years, the space in the annex will continue to be depreciated at $8,000 per year The annual advertising cost for the new product will be $50,000. A supervisor will be hired and paid $3,500 per month to oversee production Electricity for operating machines will be $120 per unit. The cost of shipping the new product to customers wil be $9 per unit To provide funds to purchase materiais, moet payrolls, and so forth, the company will have to liquidate some temporary investments. These investments are presently yielding a return of $3,000 per year Required: Using the table shown below, describe each of the costs associated with the new product decision in four ways. In terms of cost classifications for predicting cost behavior column 2), indicate whether the cost is fored or variable. With respect to cost classifications for manufacturers (column 3). If the item is a manufacturing cost, indicate whether it is direct materials, direct labor, or manufacturing overhead, it is a nonmanufacturing cost, then select one' as your answer. With respect to cost classifications for preparing financial statements (column 4), indicate whether the item is a product cost or period cost. Finally, in terms of cost classifications for decision making column 51. identify any items that are sunk costs or opportunity costs. If you identify an item as an opportunity cost, then select "none" as your answer in columns 2-4 2.5 po Required: Using the table shown below, describe each of the costs associated with the new product decision in four ways. In terms of cost classifications for predicting cost behavior column 2), indicate whether the cost is fixed or variable, with respect to cost classifications for manufacturers (column 39. If the item is a manufacturing cost. Indicate whether it is direct materials, direct labor, or manufacturing overhead. it is a nonmanufacturing cost, then select "none" as your answer. With respect to cost classifications for preparing financial statements (column 4), indicate whether the item is a product cost or period cost. Finally, in terms of cost classifications for decision making column 5). Identify any items that are sunk costs or opportunity costs. If you identify an item as an opportunity cost then select "none" as your answer to columns 2-4 Nee Cost Cimsifications for Preparing Manufacturers Financial Statements Predicting Behavior Coot om Cost Decision Making Rental revenue forgone, 330.000 per you Direct materials cont 500 per un Rental cost of warehouse $500 per month Rental cost of equipment $4,000 per month Direct labor cost 500 per un Depreciation of the annex space 58 000 per year Advertising cool, 550,000 per your Supervisor's salary: $9,500 per month Electricity for machines, 5120 perunt Shipping cost $0 per unit Return earned on investments. $3,000 per year
