13 The Mahela Company specializes in producing sets of wooden patio furniture consisting of a table and four chairs. The company currently operating at 80% of its full capacity of 2,400 sets per quarter. Quarterly cost data at this level of operations follow: Factory labour, direct $120,000 Advertising Factory supervision 50,400 40,400 Property taxes, factory building. 3,900 Sales commissions 82,000 Insurance, factory Depreciation, office equipment 2,900 4,400 Lease cost, factory equipment. 12,400 Indirect materials, factory 6,400 Depreciation, factory building 10,400 General office supplies (billing) 3,400 General office salaries 62,000 Direct materials used (wood, bolts, etc.) Utilities, factory 96,000 20,400 Required: 1. Enter the dollar amount of each cost item under the appropriate headings. As examples, this has been done already for the first tv 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 al be classified as either direct or indirect as shown.) Cost Behaviour Selling and Administrative Product Cost Cost Item Variable Fixed Cost Direct Indirect Factory labour, direct $ 120,000 $ 120,000 Advertising Factory supervision Property taxes, factory building Sales commissions 50,400 50,400 40,400 40,400 3,900 82,000 < Prev 4 of 4 Next hp decimal places.) Average product cost per patio set 3. Assume that production increases to only 2,160 sets quarterly. Would you expect the average product cost per patio set to increa decrease, or remain unchanged? O Increase O Decrease O Remain unchanged 4. Refer to the original data. The president's brother-in-law has considered making a patio set and has priced the necessary materials at a building supply store. He has asked the president if he could purchase a patio set from the Mahela Company "at cost," and the president has agreed to let him do so. a. Would you expect any disagreement over the price the brother-in-law should pay? What price does the president probably have in mind? (Round your answer to 2 decimal places.) the president may expect a minimum price of < Prev 4 of 4 Next b. Since the company is operating below its full capacity, what cost term used in the chapter might be the most applicable in this situation? Opportunity cost Sunk cost Relevant cost < Prev 4 of 4 www www Next