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The Dorilane Company specializes in producing a set of wood patio furniture consisting of a table and four chairs The set enjoys great popularity and the company has ample orders to keep production

The Dorilane Company specializes in producing a set of wood patio furniture consisting of a table and four chairs. The set enjoys great popularity, and the company has ample orders to keep production going at its full capacity of 4,100 sets per year. Annual cost data at full capacity follow:

 
Direct labor $ 86,000
Advertising $ 103,000
Factory supervision $ 72,000
Property taxes, factory building $ 23,000
Sales commissions $ 56,000
Insurance, factory $ 5,000
Depreciation, administrative office equipment $ 2,000
Lease cost, factory equipment $ 19,000
Indirect materials, factory $ 21,000
Depreciation, factory building $ 108,000
Administrative office supplies (billing) $ 3,000
Administrative office salaries $ 110,000
Direct materials used (wood, bolts, etc.) $ 432,000
Utilities, factory $ 49,000
 
Required:
1.

Enter the dollar amount of each cost item under the appropriate headings. 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.)

   

 

2.

Compute the average product cost of one patio set. (Round your answer to nearest whole dollar.)

   

 

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?

   
 
  Increase
  Decrease
  Remain unchanged

References

eBook & Resources

WorksheetLearning Objective: 02-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.Learning Objective: 02-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Difficulty: 2 MediumLearning Objective: 02-02 Identify and give examples of each of the three basic manufacturing cost categories.Learning Objective: 02-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

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May 21 2020 View more View Less

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