000 000 000 000 000 000 500 500 000 P2-10 Cost identification The Dorilane Company specializes in producing a set of wooden 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 2,000 sets per year. Annual cost data at full capacity follow: To units of product Factory labour, direct Advertising Factory supervision Property taxes, factory building Sales commissions Insurance, factory Depreciation, office equipment Lease cost, factory equipment Indirect materials, factory Depreciation, factory building General office supplies (billing)) General office salaries Direct materials used (wood, bolts, etc.) Utilities, factory REQUIRED Product cost 118,000 50,000 40,000 3,500 80,000 2,500 4,000 12,000 6,000 10,000 3,000 60,000 94,000 20,000 1 Prepare an answer sheet with the column headings shown below. Enter each cost item on your answer sheet, placing the pound amount under the appropriate headings. As examples, this has been done already for the first two items in the list above. 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 be classified as being either direct or indirect as shown.) be Cost item Cost behaviour Variable Selling or administrative Fixed cost Product cost Direct Indirect Factory labour, direct 118,000 118,000 50,000 50,000 Advertising *To units of product. 2. Total the pound amounts in each of the columns in 1 above. Compute the cost to produce one patio set. 3 Assume that production drops to only 1,000 sets annually. Would you expect the cost per set to increase, decrease, or remain unchanged? Explain. No computations are necessary