The Dorilane Company produces a set of wood patio furniture consisting of a table and four...

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Finance

The Dorilane Company produces a set of wood patio furnitureconsisting of a table and four chairs. The company has enoughcustomer demand to justify producing its full capacity of 3,900sets per year. Annual cost data at full capacity follow: Directlabor $ 90,000 Advertising $ 99,000 Factory supervision $ 72,000Property taxes, factory building $ 15,000 Sales commissions $55,000 Insurance, factory $ 5,000 Depreciation, administrativeoffice equipment $ 2,000 Lease cost, factory equipment $ 15,000Indirect materials, factory $ 18,000 Depreciation, factory building$ 103,000 Administrative office supplies (billing) $ 3,000Administrative office salaries $ 112,000 Direct materials used(wood, bolts, etc.) $ 428,000 Utilities, factory $ 48,000
Required:
1. Enter the dollar amount of each cost item under theappropriate headings. Note that each cost item is classified in twoways: first, as variable or fixed with respect to the number ofunits produced and sold; and second, as a selling andadministrative cost or a product cost. (If the item is a productcost, it should also be classified as either direct orindirect.)
2. Compute the average product cost of one patio set.
3. Assume that production drops to only 1,000 sets annually.Would you expect the average product cost per set to increase,decrease, or remain unchanged?

Answer & Explanation Solved by verified expert

4.5 Ratings (761 Votes)

1 The bifurcation is as per the table below Particulars FixedVariable Product Selling and Administrative If product Cost Direct or Indirect Direct Labour Variable Product Direct Advertising Fixed Selling and Administration NA Factory Supervision Fixed Product Direct Factory Building See Answer

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The Dorilane Company produces a set of wood patio furnitureconsisting of a table and four chairs. The company has enoughcustomer demand to justify producing its full capacity of 3,900sets per year. Annual cost data at full capacity follow: Directlabor $ 90,000 Advertising $ 99,000 Factory supervision $ 72,000Property taxes, factory building $ 15,000 Sales commissions $55,000 Insurance, factory $ 5,000 Depreciation, administrativeoffice equipment $ 2,000 Lease cost, factory equipment $ 15,000Indirect materials, factory $ 18,000 Depreciation, factory building$ 103,000 Administrative office supplies (billing) $ 3,000Administrative office salaries $ 112,000 Direct materials used(wood, bolts, etc.) $ 428,000 Utilities, factory $ 48,000Required:1. Enter the dollar amount of each cost item under theappropriate headings. Note that each cost item is classified in twoways: first, as variable or fixed with respect to the number ofunits produced and sold; and second, as a selling andadministrative cost or a product cost. (If the item is a productcost, it should also be classified as either direct orindirect.)2. Compute the average product cost of one patio set.3. Assume that production drops to only 1,000 sets annually.Would you expect the average product cost per set to increase,decrease, or remain unchanged?