Question

Manufacturing Product) Cullen Administrative or Fixed Direct labour Executive salaries Factory rent PROBLEM 2-3 Identifying Costs, Cost Concepts [LO1 - CC1: LO2- CC2; L04 - CC4, 6) The Mahela Company specializes in producing sets of wooden patio furniture consisting of a table and four chairs. The company has ample orders to keep production going at its full capacity of 2.000 sets per quarter. Quarterly cost data at full capacity follow: CHECK FIGURE 11 Total variable cost: $402,000 Factory labour, direct $168.000 Advertising Factory supervision Property taxes, factory building 50.000 50,000 4.500 80,000 3.500 14,000 Sales commissions Insurance, factory Depreciation office equipment Lease cost, factory equipment 6,000 6,000 8,000 Indirect materials, factory Depreciation, factory building 4.000 General office supplies (billing) 50,000 General office salaries 114,000 Direct materials used (wood, bolts, etc.) 30,000 Utilities, factory Required: 1. Prepare an answer sheet with the column headings shown below. Enter each cost item on your answer sheet placing the dollar amount under the appropriate headings. As examples, this has been done already for the first two items in the preceding list. 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 being either direct or indirect, as shown.)

Answer 1

Cost item	Cost behaviour		Selling & Adm Cost	Product Cost
	Variable	Fixed		Direct	Indirect
factory lab., direct		168000		168000
Advert.		50000	50000
Factory Super.		50000			50000
Propert tax factory Build		4500			4500
Sales Commissions	80000		80000
Insurance, factory		3500			3500
depre, off equip		14000	14000
Lease cost, fact equip		6000			6000
Indirect mate. Factory		6000			6000
Depre, fact build		8000			8000
General office supplies,billing	4000		4000
General office salaries		50000	50000
Dir. Mat. Used	114000			114000
Utilities factory	30000				30000