Question

Water Technology, Inc. Incurred the following costs during 20xt. The company sold all of its products manufactured during the year 19 Dárect naterial Direet labor Manufactaring overhead vtilities (prisarily electridity Depreciation on plant and equipment 5,000.000 120,000 220,000 150.000 400.000 230,000 Supervisory saleries Property taxer Selling costs Advertising Sales commisnions Administrative costs Salaries of top managecent and staff Office supplie Depreciation on bailding and eqaipment 165,000 80,000 372,000 45,000 80.000 Print erences During 20x1, the company operated at about half of its capacity, due to a slowdown In the economy Prospects for 20%2 are slightly better. Jared Lowes, the marketing manager, forecasts a 20 percent growth In sales over the 20xf level Categorize each of the costs listed below as to whether it is most likely varlable or fxed. Forecast the cost items listed. Required: the 20x2 cost amount for each of able Direct material Direct labor Manufacturing overhead Ublibies (primarily electricity) Depreciation on plant and equipment Sunervisnrv salaries Next Prex 19 o 19

Answer 1

Particulars	Variable or fixed	20x2 forecast
Direct Material	Variable	10,200,000
Direct labour	Variable	2,880,000
Manufacturing overhead:
Utilities (Primarily electricity)	Fixed	120,000
Depreciation on plant and equipment	Fixed	220,000
Insurance	Fixed	150,000
Supervisory salaries	Fixed	400,000
Property taxes	Fixed	230,000
Selling Costs:
Advertising	Fixed	165,000
Sales Commissions	Variable	96,000
Administrative costs:
Salaries of top management and staff	Fixed	372,000
Office supplies	Fixed	45,000
Depreciation on building and equipment	Fixed	80,000