Q1.

Several years ago, 4R Company purchased a small building adjacent to its manufacturing plant in order to have room for expansion when needed. Since the company had no immediate need for the extra space, the building was rented out to another company for arental revenue of $40,000 per year. The renter's lease will expire next month and, rather than renewing the lease, 4R Company has decided to use the building itself to manufacture a new product.

Direct materials cost for the new product will total $40 per unit. It will be necessary to hire a supervisor to oversee production. Her salary will be $2,500 per month. Workers will be hired to manufacture the new product, with direct labour cost amounting to $18 per unit. Manufacturing operations will occupy all of the building space, so it will be necessary to rent space in a warehouse nearby in order to store finished units of product. The rental cost will be $1,000 per month. In addition, the company will need to rent equipment for use in producing the new product; the rental cost will be $3,000 per month. The company will continue to depreciate the building on a straight-line basis, as in past years. Depreciation on the building is $10,000 per year.

Advertising costs for the new product will total $50,000 per year. Costs of shipping the new product will be $10 per unit. Electrical costs of operating machines will be $2 per unit.

To have funds to purchase materials, meet payrolls, and so forth, the company will have to liquidate some temporary investments. These investments are presently yielding a return of $6,000 per year.

Required

For each listed cost item in your to that table, 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, but you only need to place ONE "X" per item.

Variable Fixed cost Direct Direct Period Opportunity cost materials labor MOH cost cost Rental revenue foregone Direct materials Supervisor's salary Direct labor Warehouse rental Equipment cost Advertising cost Shipping cost ROI Electrical cost