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The Dorilane Company produces a set of wood patio furniture consisting of a table and four chairs. The company has enough customer demand to justify producing its full capacity of 2,000 sets per year. Annual cost data at full capacity follows: cost Bohavior Product Cost Period (seling and administrative cost) Fired Indirect Variable $118.000 Direct $118,000 S50 000 550.000 Direct Labor Advertising Factory Supervision 3 Property taxes factory building Sales Commissions 10 Insurance, factory 11 Depreciation, administrative office equipment 12 Lease cost, factory equipment 13 Indirect materials, factory 14 Depreciation factory building 15 Administrative office supplies (biling) 96 Administrative office salaries 17 Direct materials used (wood, bolts, etc) 18 Uitles factory 19 Total $118.000 $50,000 $40,000 $3.500 $80,000 $2.500 $4000 $12,000 $6,000 $10.000 $3.000 S60 000 $94.000 $20.000 5118 000 550.000 $50,000 $118.000 $0 20 21 1. Above is an answer shoot that needs to be completed Enter each cost item on your answer sheet by placing the dollar amount under the appropriate headings. As examples, this has been done already for the first two items in the list above Notice how I used formulas instead of numbers in Cell C5 F5 D6 and E6. Your totals will be automatically calculated as I have a formulas added to row 19. Note that each cost items classified in two ways First, as variable or fixed with respect to the number of units produced and sold And second, as a selling and administrative cost or a product cost of the item is a product cost it should also be classified as either direct or indirect as shown) 22 23 24 25 2 Compute the average product cost per one patio set 23 27 28 3. Assume that production drops to only 1,000 set annually Would you expect the average product cost per set to increase, decrease or remain unchanged? Explain No computations are necessary 20 30 31 4 Refer to the original data The president's brother in law has considering making himself a patio set and has priced the necessary materials at a building supply store. The brother in law has asked the president if he could purchase a patio set from the dorilan company at cost and the president A Direct materials used wood, bolts etc) Utilities, factory $94 000 $20,000 18 19 Total $118,000 $50,000 $50,000 $118.000 $0 20 21 22 23 1. Above is an answer sheet that needs to be completed. Enter each cost item on your answer sheet by placing the dollar amount under the appropriate headings. As examples, this has been done already for the first two items in the list above. Notice how I used formulas instead of numbers in Cell C5, F5. D6 and E6. Your totals will be automatically calculated as I have a formulas added to row 19. Note that each cost item is classified in two ways: First, as variable or fixed with respect to the number of units produced and sold And second as a selling and administrative cost or a product cost (if the item is a product cost, it should also be classified as either direct or indirect as shown.) 2. Compute the average product cost per one patio set 24 26 27 3. Assume that production drops to only 1,000 set annually Would you expect the average product cost per sotto increaso, decrease or remain unchanged? Explain No computations are necessary 31 4 Refer to the original data. The president's brother in law has considering making himself a patio set and has priced the necessary materials at building supply store. The brother-in-law has asked the presidentit he could purchase a patio set from the dorilan company at cost and the president agreed to let him do so a Would you expect any disagreement between the two men over the price the brother in law should pay? Explain What does the president probably have in mind? 33 ***** The brother-in-law? 39 The company is operating at full capacity, what cost term used in the chapter might be justification for the president to charge full regular price to the brother-in-law and still be selling at cost? 40 42 43

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