OFF Company beganoperations several years ago. The company purchased a building and, since onlyhalf of the space was needed for operations, the remaining space was rented toanother firm for rental revenue of $20,000 per year. The success of OFFCompany's product has resulted in the company needing more space. The renter'slease will expire next month and OFF will not renew the lease in order to usethe space to expand operations and meet demand.
The company's product requires materials that cost $25 per unit. The companyemploys a production supervisor whose salary is $2,000 per month (note: theproduction supervisor oversees multiple products). Production line workers arepaid $15 per hour to manufacture and assemble the product. The company rentsthe equipment needed to produce the product at a rental cost of $1,500 permonth. Additional equipment will be needed as production is expanded and themonthly rental charge for this equipment will be $900 per month. The buildingis depreciated on the straight-line basis at $9,000 per year.
The company spends $40,000 per year to market the product. Shipping costs foreach unit are $20 per unit.
The company plans to liquidate several investments in order to expandproduction. These investments currently earn a return of $8,000 per year.
Required:
Complete the answer sheet on the following page by placing an "X"under each heading that identifies the cost involved. The "Xs" can beplaced under more than one heading for a single cost, e.g., a cost might be asunk cost, an overhead cost, and a product cost. An "X" can thus beplaced under each of the