KJ Manufacturing, which began operation on Mac 1 produces a unique model of bicycle helmet. Information related to first month activities are as follows: Number of helmets produced 10,000 units Number of helmets sold 8,000 units Rent on factory equipment Insurance on factory building Raw materials (plastics, polystyrene, etc.) Utility costs for factory Suppliers for general office Wages for assembly line workers Depreciation on office equipment Miscellaneous material (glue, thread, etc.) Factory managers salary Advertising for helmets Sales commissions Depreciation on factory building RM7,000 1,500 75,000 900 300 43,000 800 1,100 5,700 14,000 7,000 1,500 KJ carries its finished good inventory at the average unit cost of production. There was no work in process (WIP) at end of the month. Required: a) Compute each of the following costs for Mac: (i) total prime cost and (b) manufacturing overhead cost. b) Compute the companys average unit cost of production. c) Determine the cost of the Mac 31 finished good inventory. d) Compute the companys cost of goods sold.

If next years production increases to 11,000 units and general cost behaviour patterns do not change, what the likely effect on :

Prime cost per unit? Why?

Total depreciation on factory building? Why?

Describe the economic characteristics of sunk costs and opportunity cost, and explain the impact on these costs may have on decisions.