Listed here are the total costs associated with the 2011 production of 10,000 Blu-ray Discs (BDs) manufactured by Hip-Hop. The BDs sell for $15 each.
| Cost by Behavior | Cost by Function | ||
Costs | Variable | Fixed | Product | Period |
1. Plastic for BDs—$1,000 | $1,000 |
| $1,000 |
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2. Wages of assembly workers—$20,000 |
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3. Cost of factory rent—$4,500 |
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4. Systems staff salaries—$10,000 |
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5. Labeling (outsourced)—$2,500 |
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6. Cost of office equipment rent—$700 |
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7. Upper management salaries—$100,000 |
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8. Annual fixed fee for cleaning service—$3,000 |
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9. Sales commissions—$0.50 per BD |
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10. Machinery depreciation—$15,000 |
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Required
1. Classify each cost and its amount as (a) either fixed or variable and (b) either product or period. (The first cost is completed as an example.)
2. Compute the manufacturing cost per BD.
Analysis Component
3. Assume that 15,000 BDs are produced in the next year. What do you predict will be the total cost of plastic for the BDs and the per unit cost of the plastic for the BDs? Explain.
4. Assume that 15,000 BDs are produced in the next year. What do you predict will be the total cost of factory rent and the per unit cost of the factory rent? Explain.
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