The ABD Company began operations several years ago. The company purchased a building and, since only half of the space was needed for operations, the remaining space was rented to another firm for rental revenue of PhP1,000,000 per year. The success of ABD Company's product resulted in the company needing more space. The renter's lease will expire next month and ABD will not renew the lease in order to use the space to expand operations and meet demand. The company's product requires materials that cost PhP1,250 per unit. The company employs a production supervisor whose salary is PhP100,000 per month. Production line workers are paid PHP750 per hour to manufacture and assemble the product. The company rents the equipment needed to produce the product at a rental cost of PhP75,000 per month. Additional equipment will be needed as production expanded and the monthly rental charge for this equipment will be PhP45,000 per month. The building is depreciation on the straight-line basis at PhP450,000 per year. The company spends PhP2,000,000 per year to market the product. Shipping costs for each unit are PhP1,000 per unit. The company plans to liquidate several investments in order to expand production. These investments currently earn a return of PhP400,000 per year. Required: Complete the table below by placing an "x" under each heading that identifies the cost involved. The "x's" can be placed under more than one heading for a single cost, e.g. a cost might be a sunk cost, an overhead cost, and a product cost. An "x" can thus be placed under each of these headings opposite the cost. Mftg Oppor- Variable Fixed Direct Direct Overhead Period tunity Sunk Cost Cost Materials Labor Cost Cost Cost Cost Rental revenue Materials costs Production supervisor salary Production line workers' wages Equipment rental Building depreciation Marketing costs Shipping costs Return on present investments
The ABD Company began operations several years ago. The company purchased a building and, since only half of the space was needed for operations, the remaining space was rented to another firm for rental revenue of PhP1,000,000 per year. The success of ABD Company's product resulted in the company needing more space. The renter's lease will expire next month and ABD will not renew the lease in order to use the space to expand operations and meet demand. The company's product requires materials that cost PhP1,250 per unit. The company employs a production supervisor whose salary is PhP100,000 per month. Production line workers are paid PHP750 per hour to manufacture and assemble the product. The company rents the equipment needed to produce the product at a rental cost of PhP75,000 per month. Additional equipment will be needed as production expanded and the monthly rental charge for this equipment will be PhP45,000 per month. The building is depreciation on the straight-line basis at PhP450,000 per year. The company spends PhP2,000,000 per year to market the product. Shipping costs for each unit are PhP1,000 per unit. The company plans to liquidate several investments in order to expand production. These investments currently earn a return of PhP400,000 per year. Required: Complete the table below by placing an "x" under each heading that identifies the cost involved. The "x's" can be placed under more than one heading for a single cost, e.g. a cost might be a sunk cost, an overhead cost, and a product cost. An "x" can thus be placed under each of these headings opposite the cost. Mftg Oppor- Variable Fixed Direct Direct Overhead Period tunity Sunk Cost Cost Materials Labor Cost Cost Cost Cost Rental revenue Materials costs Production supervisor salary Production line workers' wages Equipment rental Building depreciation Marketing costs Shipping costs Return on present investments
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:The ABD Company began operations several years ago. The company purchased a building and,
since only half of the space was needed for operations, the remaining space was rented to
another firm for rental revenue of PhP1,000,000 per year. The success of ABD Company's
product resulted in the company needing more space. The renter's lease will expire next
month and ABD will not renew the lease in order to use the space to expand operations and
meet demand.
The company's product requires materials that cost PhP1,250 per unit. The company employs
a production supervisor whose salary is PhP100,000 per month. Production line workers
are paid PHP750 per hour to manufacture and assemble the product. The company rents
the equipment needed to produce the product at a rental cost of PhP75,000 per month.
Additional equipment will be needed as production expanded and the monthly rental charge
for this equipment will be PhP45,000 per month. The building is depreciation on the
straight-line basis at PhP450,000 per year.
The company spends PHP2,000,000 per year to market the product. Shipping costs for each unit
are PhP1,000 per unit.
The company plans to liquidate several investments in order to expand production. These
investments currently earn a return of PhP400,000 per year.
Required:
Complete the table below by placing an "x" under each heading that identifies the cost involved.
The "x's" can be placed under more than one heading for a single cost, e.g. a cost might
be a sunk cost, an overhead cost, and a product cost. An "x" can thus be placed under each
of these headings opposite the cost.
Mftg
Оppor-
Variable
Fixed
Direct
Direct
Overhead
Period
tunity
Sunk
Cost
Cost
Materials
Labor
Cost
Cost
Cost
Cost
Rental revenue
Materials costs
Production supervisor
salary
Production line workers'
wages
Equipment rental
Building depreciation
Marketing costs
Shipping costs
Return on present
investments
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