MKT 100 Lecture Notes - Variable Cost, Ski Lift, Fixed Cost

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Published on 26 Mar 2013
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MKT100 - Metrics Mastery Worksheets
Worksheet: Metric 1 Expense Types
1) The Comfy Chair Company makes reclining chairs at its plant and
sells them exclusively through its own retail store. It has the
following expenses:
Plant rent and taxes = $12,000.00
Office and management expenses = $220,000.00
Machinery and equipment purchased = $100,000.00
Direct materials = $27.00/chair
Direct labour = 4 hours/chair @ $14.00/hour
Transportation = $5.00/chair
Commercial store front unit purchase = $500,000.00
Advertising costs = $100,000.00
Sales staff wages before commissions = $250,000.00
Commission = $12.00/chair
(a)Identify the Comfy Chair Company’s variable costs.
(b)What is the total cost to produce and sell each reclining chair?
(c) Identify the Comfy Chair Company’s fixed costs.
(d)What are the total fixed costs?
(e)Identify the one-time fixed costs incurred by the Comfy Chair
Company.
(f) What are the total one-time fixed costs?
Answer:
(a) Direct materials = $27.00/chair
Direct labour = 4 hours/chair @ $14.00/hour
Transportation = $5.00/chair
Commission = $12.00/chair
(b) $100.00/chair
(c) Plant rent and taxes = $12,000.00
Office and management expenses = $220,000.00
Advertising costs = $100,000.00
Sales staff wages = $250,000.00
(d) $582,000.00
(e) Machinery and equipment purchased = $100,000.00
Commercial store front unit = $500,000.00
(f) $600,000.00
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