Question

The Outdoor Dining 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 4,200 sets per year. Annual cost data at full capacity follow

Direct labour Advertising Factory supervision Property taxes, factory building Sales commissions Insurance, factory Depreciation, administrative office equipment Lease cost, factory equipment Indirect materials, factory Depreciation, factory Administrative office supplies Direct materials used (wood, bolts, etc.) Utilities, factory $ 93,88e $ 184,8ae $ 71,88e $ 28,88e s64,88e $ 7,88e $2,6e $ 16,8ee $ 19,88e 187,886 $ 6,88e $ 428,88e $ 48,8ae 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.) Selling or Administrative Cost Behavior Product Cost Cost Itemm Variable Fixed Cost Direct Indirect Direct labour Factory supervision Propenty taies factory buildin Sales commissions Insurance, factory Depreciation, administrative office equipment Lease cost, factory equipment Indirect materials, factory Depreciation, factory building Administrative office supplies Direct materials used Utilities, factory Total costs

2. Compute the average product cost per patio set.

Answer 1

1
	Cost Behavior		Selling or Administrative	Product cost
	Variable	Fixed	Cost	Direct	Indirect
Direct labor	93000			93000
Advertising		104000	104000
Factory supervision		71000			71000
Property taxes, factory building		20000			20000
Sales commissions	64000		64000
Insurance, factory		7000			7000
Depreciation, administrative office equipment		2000	2000
Lease cost, factory equipment		16000			16000
Indirect materials, factory	19000				19000
Depreciation, factory building		107000			107000
Administrative office supplies	6000		6000
Direct materials used	428000			428000
Utilities, factory	40000				40000
Total costs	650000	327000	176000	521000	280000
2
Direct Product cost	521000
Indirect Product cost	280000
Total product cost	801000
Divide by Number of sets	4200
Average product cost	191	per set