The annual opportunity cost of carrying inventory equals the average inventory level, times the per-unit purchase price, times the cost of capital. The average inventory level is the order quantity divided by 2. Thus, the annual opportunity cost of carrying inventory is US $150 [(500 units -2) x $ 5x .12].

Appraisal activities include inspection and testing. Appraisal costs (such as test equipment maintenance and destructive testing) are incurred to detect products not conforming to specifications.

There is no systematic relationship bee en standard monetary units shipped and the percentage of scrap. A company wants to determine its marketing costs for budgeting purposes. Activity measures and costs incurred for 4 months of the current year are presented in the table below. Advertising is considered to be a discretionary cost.
Salespersons are paid monthly salaries plus commissions. The sales force was increased from 20 to 21 individuals during the month of May.

The average tax rate is calculated using the weighted-average method. The weight assigned to each rate is determined by the proportion of taxable income subject to it. The average tax rate is 21% [(US $30,000 $50,000) x _15 + $20,000 $50,000) x .30].