Mahmoud has a garage that was constructed at a cost of $8,000 several years ago. Mahmoud decided to use the garage in constructing and selling surfboards in his spare time. The garage will be depreciated over a 20-year life. Mahmoud has determined that each surfboard will require $60 in wood. He will hire students to do most of the work and pay them $70 for each surfboard completed. He will rent tools at a cost of $400 per month. Mahmoud has drawn money out of his savings account in the bank to provide the capital needed to get the operation going. The savings were earning interest at 6 percent annually. The Orly advertising agency will handle advertising at a cost of $200 per month. Mahmoud will hire students to sell the surfboard and pay a commission of $40 per board. wat is the differential cost?

Required:

From the foregoing information/above text, identify all the examples you can of the following types of costs (a single item may be identified as more than one type of cost):

Cost Item

Your Answer

Variable cost

Fixed cost

Selling or administrative cost

Product cost

Manufacturing overhead cost

Sunk cost

Opportunity cost

Differential cost (between the alternatives of producing or not producing surfboard)