Exercise A: Manufacturing Cost Classification

Bike Inc. is a small company that builds custom bikes to customer specifications and operates out of a small former warehouse. The pieces and parts of the bicycles are supplied by different manufacturers. Some of the costs incurred by the factory are presented below. Indicates the classification of costs into the following categories: direct materials (MD), direct labor (MOD), indirect costs (CI), administrative costs (CA), or costs of sales (CV).

1. Depreciation of tools2. Rental of the premises3. Salary of the employees who manufacture the bicycles4. Cost of advertisements in local magazines5. Accountant salary6. Purchasing and Manufacturing Supervisor Salary7. Cost of aluminum bicycle frames8. Commissions paid to sellers Exercise B: Cost behavior Expreso Deli is a company that has several natural milkshake kiosks operating in various shopping centers. Each kiosk has a fixed cost of $950 and a variable cost of $0.65 for each raid. 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
	1,750	1,825	1,930
Fixed cost
Variable cost
Total cost
Average cost per batter served

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

Exercise C: Relevant costs (Differential Costs), opportunity (portunity) and irrecoverable (sunkJuan Gonzlez owns a small condominium with 8 apartments on the coast, very close to a beach and tourist area. The condominium has a laundry room with 3 washers and 3 electric dryers on the first floor and the owner wants to replace the old washers and dryers with new ones that will save water and energy as they would be gas dryers. The condominium manager suggests that it would be better to invest the money in fitting out 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, indicate what type of cost would be considered:Pertinent cost (CP), opportunity costs (CO) or sunk costs (CI). If no category applies, write N/A.

Cost of new washing machines
Electricity and water cost of new washing machines
Maintenance cost of old washers and dryers
Entertainment Lounge Benefits
Cost of removing old washers and dryersentertainment room maintenance
entertainment room maintenance
Preparation costs and equipment of the new entertainment room

Exercise D: Cost behavior; Income statement in contribution format

Sunset Company, Inc. manufactures and sells a unique product. The following table presents the total and unit costs within a relevant level of 30,000 to 60,000 units produced and sold annually

Complete the information in the table.

	Units manufactured and sold
	36,000	47,000	52,000
Total Costs
Fixed Costs	$ 80,000
Variable Costs	$195,000
Total Costs	$275,000
Costo unitario
unit fixed cost
Unit Variable Cost
total unit cost