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Cost Classification: The Lee’s have provided you with the following costs and relevant information that are...

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Finance

  1. 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.

  1. Cost of goods sold of $35 per unit
  2. 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.
  3. Advertising fees = $3,000
  4. Bank fees = $200
  5. Phone/internet = $150 per month
  6. Shipping = $3 per unit
  7. Utilities = $100 per month
  8. Office Supplies = $900
  9. Conference Exhibitor Fee = $3000
  10. Travel Expenses for Conference (e.g. airfare, meals,taxi) = $1200
  1. 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.)

Answer & Explanation Solved by verified expert
3.9 Ratings (547 Votes)
AClassify each of the costs as Variable and fixed costsCost of Goods soldVariable costlabour per MonthFixed costPart time EmployeeFixed costAdvertising FeeFixed costbank feeFixed costPhone InternetFixed costShippingFixed    See Answer
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