Question 6

Sherri has developed a new popular bag for which she would like to hire workers to produce and spend some time promoting it. She will rent a garage for $500 per month for production purposes. Utilities will cost $60 per month. Sherri has already taken an industrial design course at the local college to help prepare.This course cost $250. Sherri will rent production equipment at a monthly cost of $800. Sherri estimates the material cost per unit will be $3, and the labour cost will be $4 per unit. Sherri will need to quit her job, which pays $6000 per month. Advertising and promotion will cost $700 per month. Sherri anticipates producing 50 bags in the first month.

Answer the following questions.

1. What is the total anticipated fixed cost $ amount associated with production of the new product for the first month?

2. What is the total anticipated variable cost $ amount associated with the production of the new product for the first month?

3. What is the total opportunity cost $ amount associated with producing the new product?

4. What is the total sunk cost $ amount associated with producing the new product?

5. Which cost $ amount would NOT be considered a differential cost?