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TOT1 Cost Classification 202020

Khaled is considering quitting his job to produce and market a new technology device, incurring various costs including factory rent, utilities, equipment rental, material and labor costs, advertising, and the opportunity cost of his current salary. The document outlines the need to categorize these costs into different headings such as manufacturing, selling/marketing, overhead, fixed, variable, direct, and sunk costs. Khaled's monthly expenses total significant amounts, impacting his decision to pursue this venture.

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wajin97412
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25 views1 page

TOT1 Cost Classification 202020

Khaled is considering quitting his job to produce and market a new technology device, incurring various costs including factory rent, utilities, equipment rental, material and labor costs, advertising, and the opportunity cost of his current salary. The document outlines the need to categorize these costs into different headings such as manufacturing, selling/marketing, overhead, fixed, variable, direct, and sunk costs. Khaled's monthly expenses total significant amounts, impacting his decision to pursue this venture.

Uploaded by

wajin97412
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Cost Concepts

01. Khaled has developed a new technology device that is so exciting he is


considering quitting his job in order to produce and market it on a large-scale basis.
Khaled will rent a small factory for 1,000dhs per month for production purposes.
Utilities will cost 500dhs per month. Khaled has already taken an industrial design
course at Dubai Men’s College to help prepare for this venture. The course cost
800dhs. Khaled will rent production equipment at a monthly cost of 3,000dhs. He
estimates the material cost per unit will be 20dhs, and the labor cost will be 12dhs
per unit. He will hire workers and spend his time promoting the product. To do this he
will quit his job which pays 25,000dhs per month. Advertising and promotion will cost
3,500dhs per month.
Required:
1- Complete the chart below by placing an "X" under each heading that helps to
identify the cost involved. There can be "X’s" placed under more than one
heading for a single cost, e.g., a cost might be a sunk cost, an overhead cost
and a fixed cost; there would be an "X" placed under each of these headings
opposite the cost.
manufacturing cost

Selling/marketing
Opportunity Cost
Overhead Cost
Manufacturing

Variable Cost
Direct Cost
Fixed Cost

Sunk Cost
None

Cost

Small factory rent

Utilities

Cost of Industrial Design Course

Equipment rent

Material Cost

Labor Cost

Advertising

Current Salary

Engineering Economics [EGN 3202] Page 1 of 1

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