Exercise A: Classification of manufacturing costs Bike Inc. is a small company that builds custom bikes to customer specifications and operates out of a small facility that used to be a warehouse. The parts and parts of the bicycles are supplied by different manufacturers. Some of the costs incurred by the factory are presented below. It indicates the classification of costs in the following categories: direct materials (MD), direct labor (MOD), indirect costs (CI), administrative costs (CA) or sales costs (CV). 1. Commissions paid to sellers ____ 2. Salary of the purchasing and manufacturing supervisor____ 3. Cost of aluminum bicycle frames_____ 4. Cost of ads in local magazines_____ 5. Accountant's salary_______ 6. Rental of the premises_______ 7. Depreciation of tools_____ 8. Salary of employees who manufacture bicycles______

Exercise B: Cost behavior

Expreso Deli is a company that has several natural shake kiosks operating in various shopping centers. Each kiosk has a fixed cost of $ 1,000 and a variable cost of $ 0.50 for each batter.

1. Complete the following table of estimated costs at the different activity levels (shakes served per week) presented in each column.

	Total shakes served in a week
1,500	1,600	1,700
Fixed Cost
Variable Cost
Total Cost
Average cost per shake served

2. Explain how the average cost per shake served varies as the level of activity increases and why.

Exercise C: Relevant costs (Differential Costs), opportunity (portunity) and unrecoverable (sunk)

Juan Gonzlez owns a small condominium of 8 apartments on the coast, very close to a beach and tourist area. The condo has a laundry room with 3 washing machines and 3 electric dryers on the first floor and the owner wishes to replace the old washers and dryers with new ones that will save water and energy as they would be gas dryers. The manager of the condo suggests that it would be better to invest the money in equipping a room that is available as an entertainment area and put a large television, a pool table and a ping-pong table to attract more customers. For each of the following cost items, he indicates what type of cost would be considered: Relevant cost (CP), opportunity costs (CO), or sunk costs (CI). If no category applies, write N/ A.

1.Cost of new washers_____ 2.Cost of electricity and water of the new washing machines____ 3.Cost of maintaining old washers and dryers____ 4.Entertainment Lounge Benefits____ 5.Cost of removing old washers and dryers____ 6.Entertainment room maintenance____ 7.New entertainment room setup and equipment costs_____