Jump Up Inc. of Reno, Nevada, acquired its factory building about 10 years ago. For several
years the company has rented out a small annex attached to the rear of the building.
The company has received a rental income of $30,000 per year on this space. The renter's
lease will expire soon, and rather than renewing the lease, the company has decided to
use the space itself to manufacture a new product.
Direct materials cost for the new product will total $80 per unit. To have a place to store
finished units of product, the company will rent a small warehouse nearby. The rental
cost will be $500 per month. In addition, the company must rent equipment for use in
producing the new product; the rental cost will be $4,000 per month. Workers will be
hired to manufacture the new product, with direct labor cost amounting to $60 per
unit. The space in the annex will continue to be depreciated on a straight-line basis, as
in prior years. This depreciation is $8,000 per year.
Advertising costs for the new product will total $50,000 per year. A supervisor will be
hired to oversee production; her salary will be $1,500 per month. Electricity for
operating machines will be $1.20 per unit. Costs of shipping the new product to
customers will be $9 per unit.
REQUIRED: List the different costs associated with the new product under "Name
of the Cost." Then place an X under each heading that helps to describe the type of cost
involved. There may be Xs under several column headings for a single cost. (For example,
a cost may be a fixed cost and manufacturing overhead; you would place an X under each
of these column headings opposite the cost.) The direct materials cost is shown below as
an example.

Name of the cost	Variable cost	Fixed Cost	Direct Materials	Direct Labor	Mfg. Overhead	Period (selling & Admin Cost)
Materials of Product	X		X