Cost Classification: The Lee's have provided you with the following costs and relevant information that are assumed
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Question:
- Cost Classification:The Lee's have provided you with the following costs and relevant information that are assumed for year 20XY.
- A. Classify each of the costs (a. through j.) below under C. as a variable cost or a fixed cost.
- B. Explain the importance of distinguishing between variable and fixed costs.
- C. create budgeted income statement, assuming 600 units to be produced and sold, a per unit selling price of $85, an income tax rate of 28% and the following information.
- Cost of goods sold of $35 per unit
- Labor = $400/month
- One part-time employee will be hired to take care of packaging and shipping. This employee will be paid $10 per hour. He or she is estimated to work 40 hours total per month.
- Advertising fees = $3,000
- Bank fees = $200
- Phone/internet =$150 per month
- Shipping = $3 per unit
- Utilities = $100 per month
- Office Supplies = $900
- Conference Exhibitor Fee = $3000
- Travel Expenses for Conference (e.g. airfare, meals, taxi) = $1200
- Break-Even Analysis:You have been asked to calculate how many units need to be sold to break even, based on the costs provided in task #3. Assume that only one conference will be attended and the estimated expenses associated with this conference are on target. Use the information in task #3 except do not consider taxes.)
- Contribution Margin:Based on the Break-Even Analysis just performed, what is the contribution margin per unit and the total contribution margin?
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