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Listed here are the total costs associated with the 2015 production of 15,000 Blu-ray Discs (BDs) manu- factured by Maxwell. The BDs sell for $18 each M SET B -1B tion, and Variable or Fixed Product or Period Costs Variable Fixed Product Period $1,500 $1,500 I. Plastic for BDs $1,500.. 2. Wages of assembly workers-$30,000…. 3. Cost of factory rent $6,750 5. Labeling-$0.25 per BD… 6. Cost of office equipment rent- $1,050… . 7. Upper management salaries-$120,000 8. Annual fixed fee for cleaning service $4,520 9. Sales commissions–$0.50 per BD . 1O. Machinery depreciation, straight-line$18,000
Expert Answer
1.
| Costs | Variable | Fixed | Product | Period | |
| 1. | Plastic for BDs | $ 1,500 | $ 1,500 | ||
| 2. | Wages of Assembly Workers | $ 30,000 | $ 30,000 | ||
| 3. | Cost of Factory Rent | $ 6,750 | $ 6,750 | ||
| 4. | Systems Staff Salaries | $ 15,000 | $ 15,000 | ||
| 5. | Labelling ( $ 0.25 x 15,000) | $ 3,750 | $ 3,750 | ||
| 6. | Cost of Office Equipment Rent | $ 1,050 | $ 1,050 | ||
| 7. | Upper Management Salaries | $ 120,000 | $ 120,000 | ||
| 8. | Annual fixed fee for cleaning service | $ 4,520 | $ 4,520 | ||
| 9. | Sales Commission ( $ 0.50 x 15,000) | $ 7,500 | $ 7,500 | ||
| 10. | Machinery Depreciation | $ 18,000 | $ 18,000 | ||
| $ 60,000 |
2. Manufacturing Costs per BD = $ 60,000 / 15,000 = $ 4.00
3. Total cost of plastic next year = $ 1,500 / 15,000 x 10,000 = $ 1,000.
Per unit cost = $ 1,000 / 10,000 = $ 0.10
Since plastic is a purely variable cost, it would vary linearly with the volume of production, and the cost behavior of variable costs is that they remain constant per unit.
4. Total cost of factory rent next year = $ 6,750
Per unit cost of factory rent = $ 6,750 / 10,000 units = $ 0.675 per unit.
4.
