Maureen has decided to produce and sell cricket bats in her spare time. She has a shaded area thatwas constructed at a cost of R68 000 several years ago, and which will be used for productionpurposes. 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 isestimated that 40% of this is attributable to the production of the cricket bats and the remainder isfor Maureen’s personal use and is paid in her personal capacity. Maureen has drawn R48 000 outof her savings account to provide the capital needed to get the operation going. The savings wereearning interest at 6% annually. An advertising agency will handle advertising at a cost of R1 000per month. Maureen will hire students to sell the cricket bats and pay a commission of R20 per bat.Required:Q.5.1 From the above information, identify all examples you can find of the followingtypes of costs (a single item may be identified as more than one type of cost).Also indicate the relevant rand amount relating to each cost (either per unit orper month depending on the type of cost):Q.5.1.1 Variable costs Q.5.1.2 Fixed costsQ.5.1.3 Selling and administrative costsQ.5.1.4 Product costs Q.5.1.5 Manufacturing overhead costsQ.5.1.6 Sunk costs Q.5.1.7 Opportunity costs Q.5.2 Maureen is currently looking into a business opportunity that will require her tomanufacture branded match T‐shirts for a local cricket club. Although she thinks itmight be a good opportunity, she is a bit wary of accepting the contract as her freetime is limited and she will only be able to produce 100 T‐shirts per month.T‐shirts will be sold at R200 each to club members
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:
Q.5.1 From the above information, identify all examples you can find of the following
types of costs (a single item may be identified as more than one type of cost).
Also indicate the relevant rand amount relating to each cost (either per unit or
per month depending on the type of cost):
Q.5.1.1 Variable costs
Q.5.1.2 Fixed costs
Q.5.1.3 Selling and administrative costs
Q.5.1.4 Product
Q.5.1.5 Manufacturing
Q.5.1.6 Sunk costs
Q.5.1.7 Opportunity costs
Q.5.2 Maureen is currently looking into a business opportunity that will require her to
manufacture branded match T‐shirts for a local cricket club. Although she thinks it
might be a good opportunity, she is a bit wary of accepting the contract as her free
time is limited and she will only be able to produce 100 T‐shirts per month.
T‐shirts will be sold at R200 each to club members
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