Question

Use the data to answer the question.

CASE 1-26 Cost Classification and Cost Behavior L01-1, L01-2, L01-3, L01-4 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 follow: Direct labor .............. Advertising. Factory supervision ............... Property taxes, factory building.......... Sales commissions. . . . . . . . . . . . Insurance, factory. Depreciation, administrative office equipment...... Lease cost, factory equipment......... Indirect materials, factory ..... Depreciation, factory building ............ Administrative office supplies (billing)........... Administrative office salaries. Direct materials used (wood, bolts, etc.). ... Utilities, factory... $118,000 $50,000 $40,000 $3,500 $80,000 $2,500 $4,000 $12,000 $6,000 $10,000 $3,000 $60,000 $94.000 $20,000

Answer 1

Refer the below images for the above asked questions in a detailed way of explanation.
Solution: Given Direct Direct Material Labor - $ 9400 = 1 118000 Given producing Full Capacity - 2wo sets per year. * computation of prire Direct cost Indirect cost (worry Note) per set: = $212000 = $ 94000 ... $ 306000 2000 sets - $ 163 per set Зорбор тота working Note: Selling coy) Product cost particolars cost behavior Variable Fixed Adrin expense - Direct indirect Direct $118000 $50000 450 КЗfoo $40000 $3500 40000 $ 30 000 $2500 Factory lobor - direct 13000 Advertising property taxes, factory building Factory Supervision sales Commission 80000 Insurance - factory Depreciation - office equipment - Lease est, factory equipment & Indirect naterials - factory $6000 Deprecatione factory building General office. Supples $3000 General office Salaries - Direct Materials used $94000 utilines, factory $20000 $2500 $4600 $12000 $4000 $ 0.00 $bvod 410000 p10.000 $3000 600DD $ 60000 $94000 $20000 Total cost $321000 $182000 $197.000 $ 212000 94000

$153, (4) a) yes, the president may expect a minimom price of which is the average cost to manufacture one set. He might expect a price even higher than this to a portion of the adminstrative costs as well. cover The brother un- low probably it thinking of only direct materials, cor), at most direct direct labor. cost as including Materials and Direct direct materials alone would be only $47 per set, and materials & direct labor would be only $106. b) The term is opportonity cost. The foll regular price of a set might be appropriate here, since the company is operating at full copacity, and this is the amount that most be given op (benefit forgone) to sell a set to the brother - in- law.