- Cost Classification: The Lee’s have provided you with thefollowing costs and relevant information that are assumed for year20XY.
A. Classify each of the costs (a.through j.) below under C. as a variable cost or a fixed cost.
B. Explain the importance ofdistinguishing between variable and fixed costs.
C. Prepare a budgeted incomestatement, assuming 600 units to be produced and sold, a per unitselling price of $85, an income tax rate of 28% and the followinginformation.
- Cost of goods sold of $35 per unit
- Labor = $400/month
- One part-time employee will be hired to take care of packagingand shipping. This employee will be paid $10 per hour. He or she isestimated to work 40 hours total per month.
- Advertising fees = $3,000
- Bank fees = $200
- Phone/internet = $150 per month
- Shipping = $3 per unit
- Utilities = $100 per month
- Office Supplies = $900
- Conference Exhibitor Fee = $3000
- Travel Expenses for Conference (e.g. airfare, meals,taxi) = $1200
- Break-Even Analysis: You have been asked to calculate how manyunits need to be sold to break even, based on the costs provided intask #3. Assume that only one conference will be attended and theestimated expenses associated with this conference are on target.Use the information in task #3 except do not considertaxes.)
