A company produces decorated wooden storage boxes.

QUESTION

A company produces decorated wooden storage boxes. The cost per box is:Wood and glue $9Decorative paint $4Hardware $5Shipping and handling $1The artist who creates the designs on the boxes is paid $10,000 annually. Don’t forget to include this cost. Other annual costs are:Taxes and Insurance $12,600Utilities $20,100Rent $23,000Miscellaneous Overhead Expenses $28,400Each worker costs $32,000 per annum in salary and benefits.The following production is possible:# of Workers01234567# of Boxes that can be made0650140020003450425048004500Using all this information complete the following table and answer the questions. It would be easier if you set this up in an Excel spreadsheet. When you are done, you must submit it as a Word document with your answers. You will use this table to answer questions 2 and 3. (4 marks) Your first step is to identify which are fixed costs and which are variable costs. If you will have to keep paying the cost whether you produce 0 units of the product or 10,000 units, then it is a fixed cost. In the short run you have to keep paying it. In the long run you may be able to change these fixed costs. A variable cost changes based on how much of the product you produce. But the variable costs may not change all at the same time.# of workersQTVCAVCAFCTCATCTVC / QFC / QFC + VCTC/Q001650214003200043450542506480074500MC∆TC / ∆Q

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