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 onetime fixed costs incurred by the Comfy Chair Company.
(f) What are the total onetime fixed costs?
2) Thompson Toiletries, Inc. has developed an addition to its mens’ cologne line tentatively
branded Ode d’Toad Cologne. It costs 45 cents to produce each 60mL bottle, and heavy
advertising expenditures in the first year would cost $900,000. Ode d’Toad Cologne is
priced at $7.50 for a 60mL bottle.
(a) What is the variable cost per unit to produce a bottle of Ode d’Toad?
(b) What are the total fixed costs to produce and sell Ode d’Toad?
3) Executives of Radical Recordings Ltd. produced an album entitled Sunshine/Moonshine
by the Starshine Sisters Band. The cost and price information was as follows:
Album cover $1.00
Songwriter’s royalties $0.30
Recording artist’s royalties $0.70
Direct material and labour costs to produce $1.00
Cost of producing the album (studio fee, $100,000.00
advertising, promotional expenses, etc)
Selling price $7.00
(a) Identify the variable costs, and amounts, that go into producing each album
(b) Identify the fixed costs, and amount, for producing the album 4) You are the owner of a travel agency that sells trips to university