Mary Mickell, Inc, acquired its factory building about ten years ago and has been leasing an
annex in the rear of the building, It has received a rental income $30,000 annually. The
lease is about to expire and Math/ Mickell is considering not renewing the lease, but
using the space for production of a new product. Materials used in the production of the
new product will be $80 per unit. The company will rent, for $500 per month, a small
warehouse to store finished products. The company will rent equipment to use in the
manufacturing process for $4,000 per month. Workers will be hired for production at $60
per unit. The annex will continue to be depreciated using straight-line depreciation at
$8,000 per year. A supervisor will be hired at $1,500 per month, Advertising for the new
product Will total $50,000 per year. Casts of shipping the new product to customers will
be $9 per unit and electricity to run the machinery will be $1.20 per unit.
Using the flowing headings, identify the different costs associated with the new product
decision as what type of cost they represent, It is possible for a particular cost to be
identified more than one heading. Address ALL of the costs listed above.
variable cost / fixed cost / prime cost / version cost /direct cost / direct labor / manufacturing overhead/ period cost /opportunity cost / sunk cost
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