# Cost Classification: The Lee’s have provided you with the following costs and relevant information t

Cost Classification: The Lee’s have provided you with the following costs and relevant information that are assumed for year 20XY

A Classify each of the costs (a through j) below under C as a variable cost or a fixed cost

B Explain the importance of distinguishing between variable and fixed costs

C Prepare the budgeted income statement, assuming 600 units to be produced and sold, a per unit selling price of \$85, an income tax rate of 28% and the following information

Cost of goods sold of \$35 per unit

Labor = \$400/month

One part-time employee will be hired to take care of packaging and shipping This employee will be paid \$10 per hour He or she is estimated to work 40 hours total per month

Bank fees = \$200

Phone/internet = \$150 per month

Shipping = \$3 per unit

Utilities = \$100 per month

Office Supplies = \$900

Conference Exhibitor Fee = \$3000

Travel Expenses for Conference (eg airfare, meals, taxi) = \$1200

Break-Even Analysis: You have been asked to calculate how many units need to be sold to break even, based on the costs provided in task #3 Assume that only one conference will be attended and the estimated expenses associated with this conference are on target Use the information in task #3 except do not consider taxes)

Contribution Margin: Based on the Break-Even Analysis just performed, what is the contribution margin per unit and the total contribution margin?