The Lee’s have provided you with the following costs and relevant information that are assumed for year 20XY. Classify the costs as variable costs or fixed costs. Explain the importance of distinguishing between variable and fixed costs. If business is expected to be steady from month to month, provide a monthly budget based on these figures.
Advertising Fees = $4,000
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.
Packaging Supplies = $3,000
Office Supplies = $800
Phone and Internet Service = $115/month
Product Supplies = $9,000
Shipping Fees = $1,000/month
Conference Exhibitor Fee = $3,000
Travel Expenses for Conference (e.g. airfare, meals, taxi) = $1,200
Utilities for the Home Workshop = $105/month
Budget Preparation: The Lees believe that there production could quadruple in one month after being on Shark Tank. They want to be prepared for this. Based on the monthly budget calculated above, create a new monthly budget for quadrupled production. Assume that 70 units were produced in the first budget and 280 units will be produced per month with the new budget.