Maureen has decided to produce and sell cricket bats in her spare time. She has a shaded area that was constructed at a cost of R68 000 several years ago, and which will be used for production purposes.
Maureen has decided to produce and sell cricket bats in her spare time. She has a shaded area that
was constructed at a cost of R68 000 several years ago, and which will be used for production
purposes. Maureen has determined that each cricket bat will require R300 in wood and grip of R60.
Other minor expenses like varnish and stickers is estimated to be R10 per bat in total.
She will hire students to do most of the work and pay them R350 for each cricket bat completed.
She will rent tools at a cost of R2 000 per month. The total monthly electricity bill is R1 500. It is
estimated that 40% of this is attributable to the production of the cricket bats and the remainder is
for Maureen’s personal use and is paid in her personal capacity. Maureen has drawn R48 000 out
of her savings account to provide the capital needed to get the operation going. The savings were
earning interest at 6% annually. An advertising agency will handle advertising at a cost of R1 000
per month. Maureen will hire students to sell the cricket bats and pay a commission of R20 per bat.
Required:
Each cost (either per unit or
per month depending on the type of cost):
Q.5.1.1 Variable costs (5)
Q.5.1.2 Fixed costs (4)
Q.5.1.3 Selling and administrative costs (2)
Q.5.1.4 Product costs (6)
Q.5.1.5
Q.5.1.6 Sunk costs (1)
Q.5.1.7 Opportunity costs (2)
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