Staci Valek began dabbling in pottery several years ago as a hobby. Her work is quite creative, and it hasbeen so popular with friends and others that she has decided to quit her job with an aerospace company andmanufacture pottery full time. The salary from Staci’s aerospace job is $3,800 per month.Staci will rent a small building near her home to use as a place for manufacturing the pottery. Therent will be $500 per month. She estimates that the cost of clay and glaze will be $2 for each finishedpiece of pottery. She will hire workers to produce the pottery at a labor rate of $8 per pot. To sell herpots, Staci feels that she must advertise heavily in the local area. An advertising agency states that it willhandle all advertising for a fee of $600 per month. Staci’s brother will sell the pots; he will be paid acommission of $4 for each pot sold. Equipment needed to manufacture the pots will be rented at a costof $300 per month.Staci has already paid the legal and filing fees associated with incorporating her business in the state.These fees amounted to $500. A small room has been located in a tourist area that Staci will use as a salesoffice. The rent will be $250 per month. A phone installed in the room for taking orders will cost $40 permonth. In addition, a recording device will be attached to the phone for taking after-hours messages.Staci has some money in savings that is earning interest of $1,200 per year. These savings will bewithdrawn and used to get the business going. For the time being, Staci does not intend to draw any salaryfrom the new company.Required:1. Prepare an answer sheet with the following column headings:PeriodName (Selling andof the Variable Fixed Direct Direct Manufacturing Administrative) Opportunity SunkCost Cost Cost Materials Labor Overhead Cost Cost Cost
Staci Valek began dabbling in pottery several years ago as a hobby. Her work is quite creative, and it has
been so popular with friends and others that she has decided to quit her job with an aerospace company and
manufacture pottery full time. The salary from Staci’s aerospace job is $3,800 per month.
Staci will rent a small building near her home to use as a place for manufacturing the pottery. The
rent will be $500 per month. She estimates that the cost of clay and glaze will be $2 for each finished
piece of pottery. She will hire workers to produce the pottery at a labor rate of $8 per pot. To sell her
pots, Staci feels that she must advertise heavily in the local area. An advertising agency states that it will
handle all advertising for a fee of $600 per month. Staci’s brother will sell the pots; he will be paid a
commission of $4 for each pot sold. Equipment needed to manufacture the pots will be rented at a cost
of $300 per month.
Staci has already paid the legal and filing fees associated with incorporating her business in the state.
These fees amounted to $500. A small room has been located in a tourist area that Staci will use as a sales
office. The rent will be $250 per month. A phone installed in the room for taking orders will cost $40 per
month. In addition, a recording device will be attached to the phone for taking after-hours messages.
Staci has some money in savings that is earning interest of $1,200 per year. These savings will be
withdrawn and used to get the business going. For the time being, Staci does not intend to draw any salary
from the new company.
Required:
1. Prepare an answer sheet with the following column headings:
Period
Name (Selling and
of the Variable Fixed Direct Direct Manufacturing Administrative) Opportunity Sunk
Cost Cost Cost Materials Labor
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