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 4,000 sets per year. Annual cost data at full capacity follow: BOK ences 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 $ 87,000 $105,000 $ 73,000 $ 17,000 $ 61,000 $ 7.000 $ ,000 $ 12,000 $ 18,000 $109,000 $ 3,000 $435,000 $ 41,000 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 Cost Behavior Product Cost

Answer 1

a.
COST ITEMS	COST BEHAVIOR		SELLING AND ADMINSTRATIVE	PRODUCT COST
	VARIABLE	FIXED	COST	DIRECT	INDIRECT
Direct labor	87000			87000
Advertising		105000	105000
Factory supervision		73000			73000
Property taxes,factory building		17000			17000
Sales commissions	61000		61000
Insurance factory		7000			7000
Depreciation,adminstrative office equipment		3000	3000
lease cost factory equipment		12000			12000
indirect materials, factory	18000				18000
Depreciation ,factory building		109000			109000
adminstrative office supplies	3000		3000
Direct materials used	435000			435000
utilities,factory	41000				41000
total costs	645000	326000	172000	522000	277000
b.
Average cost product=product cost(direct +indirect)/number of set
= (522000+277000)/4000 set
= 799000/4000
=$199.75 per set
c.
If company product only 1000 set then product cost will be increase.
Explanation :Product cost per unit will be increase because fixed cost will remain same even product only 1 set . Therefore fixed cost incease so product cost per set will aslo increase.