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 3,900 sets per year Annual cost data at full capacity follow 1 Direct labour $93.000 Advertising 101000 $ Factory supervision $73.000 Property taxes, factory building $ 16.000 Sales commissions $56.000 Insurance, factory $ 6000 Depreciation, administrative office equipment 2000 Lease cost factory equipment $ 12,000 Indirect materials factory $ 16,000 Depreciation factory 5 102.000 Administrative office supplies $ 4000 Direct materials used wood, bots, etc) Unes, factory $63.000 $1.000 Required: Enter the dollar amount of each cost hem under the appropriate headings. Note that each cost item isted in two ways first as variable or feed with respect to the number of units produced and stand second seeing and administrative cost of product cost them is product cost, it shoud also be cited as the detto indirect Product Cat Contam Direct Direct labour Advertising Factory supervision Property taxes.factory building Saeco Innectory Depreciation, administrative oficient Lease contactory Indirectory Depreciation factory building we office spole Dread Total costs 2. Comoure the average product cost per potest Round your answer to nearest whole per 3. Assume that production drops to only 1000 sets per year. Would you expect the average product cost per patio sotto increase, decrease or remain unchanged? Increase Decrease Remain unchanged

Answer 1

1
	Cost behavior		Selling or administrative	Product cost
	Variable	Fixed	Cost	Direct	Indirect
Direct labor	93000			93000
Advertising		101000	101000
Factory supervision		73000			73000
Property taxes, factory building		16000			16000
Sales commissions	56000		56000
Insurance, factory		6000			6000
Depreciation, administrative office equipment		2000	2000
Lease cost, factory equipment		12000			12000
Indirect materials, factory	16000				16000
Depreciation, factory building		102000			102000
Administrative office supplies	4000		4000
Direct materials used	431000			431000
Utilities, factory	43000				43000
Total costs	643000	312000	163000	524000	268000
2
Average product cost of one patio set	203	=(524000+268000)/3900
3
Average product cost per set would increase