Answer:
Costs of: Opportunity Sunk Variable Fixed MOH Product Selling Differential
Garage rent (Fixed)........................................X
Utilities (Fixed).................................................X
Cost of the industrial design course (Sunk) ... ''the cost has been spent''
Equipment rented
.(Fixed)...............................X
Material cost (Variable)...................X
Labor cost (Variable).......................X
Present salary (Opportunity cost / Differential Cost)..'He wont earn anymore'
Advertising (Fixed and Selling Costs)............X...................................X
Explanation:
Costs of: Opportunity Sunk Variable Fixed MOH Product Selling Differential
Garage rent (Fixed)........................................X
Utilities (Fixed).................................................X
Cost of the industrial design course (Sunk) ... ''the cost has been spent''
Equipment rented
.(Fixed)...............................X
Material cost (Variable)...................X
Labor cost (Variable).......................X
Present salary (Opportunity cost / Differential Cost)..'He wont earn anymore'
Advertising (Fixed and Selling Costs)............X...................................X
1. Garage rent is fixed Manufacturing Overhead because he will pay a fixed rent amount every month.
2. Utilities is fixed Manufacturing Overhead because he will pay a fixed amount every month.
3. Cost of the industrial design course is Sunk because the cost has been spent already
4. Equipment rented is fixed Manufacturing Overhead because he will pay a fixed amount every month.
5. Material cost is variable because it will depend on how much produced every month.
6. Labor cost is variable because it will depend on how much produced every month.
7. Present salary is an Opportunity cost because wont earn salary anymore when he starts the business; this is also differential because it is the difference between the cost of the two alternative decisions
Advertising is a fixed Selling costs because he will pay a fixed amount every month and it is related to sales not production.
