Last Year Zephyr Company Sold 9,000 Units That Cost $40,000

question 42

Essay

Last year Zephyr Company sold 9,000 units that cost $40,000 to produce. This cost included $3,000 in fixed computer resource cost, $10,000 in fixed labor cost, and communications resource cost at $3.00 per unit. Resource costs are expected to be the same next year. Zephyr expected to sell 18,000 units. The sales manager predicts that next year's cost will be $80,000.
Required:
Comment on the sales manager's cost prediction.

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Definitions:

Journalize Transactions

The process of recording financial transactions in a company's accounting records or journal.

Dishonored Note

A promissory note that has not been paid by the maker when due, leading to a default.

Interest Revenue

Income earned by an entity for lending its money or letting another entity use its funds.

Journalize Transactions

The process of recording business transactions in a company's journal, thereby providing a chronological record of financial activities.