Direct labor 20,000 units 30,000 Indirect labor 100,000 18,000 80,000 Insurance 60,000 60,000 Maintenance 14,400 44,000 Depreciation 50,000 50,000 Utilities 18,000 54,000 Direct materials 42,000 140,000 Required: Classify each cost as variable, fixed or mixed. Problem 13: Classification of Costs Orocan Corporation acquired its factory building about five years ago. For several years the company has rented out a small space of the building. The company has received a rental income of P50,000 per month on this space. The lease term will expire soon, and rather than renewing the lease, Orocan decided to use the space itself to manufacture new product. Direct materials cost for the new product will total P100 per unit. To have a place to store finished goods, the company will rent a small warehouse nearby. The rental cost will be P10,000 per month. In addition, the company must rent equipment for use in producing the new product; the rental cost will be P15,000 per month. Workers will be hired to manufacture the new product, with direct labor cost amounting to P15 per hour. The space used in the production is depreciated on a straight line method, as in prior years. The depreciation is P5,000 per month. Advertising costs for the new product will total P150,000 per year. A supervisor will be hired to oversee the production; his salary will be P25,000 per month. Electricity of machines will be P2 per unit. Cost of shipping the new product to the customers will be P4 per unit. To provide funds for payment of various expenses, the company will have to sell some temporary investments. These investments are earning P20,000 per year. Required: List the different costs associated with the new product and classify the cost. Use the table below to answer the problem. Behavior Product Period Cost Variable Fixed DM FOH Selling DL Admin Opportunity Sunk 129