2. Do you believe Gallant's actions are ethical? Why or why not? PROBLEM 2-25 Cost Classification and Cost Behavior (L0 2-1, LO 2-2, Lo 2 The Dorilane 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 produc- tion going at its full capacity of 2,000 sets per year. Annual cost data at full capacity follow: 3, LO2-4 Direct labor Advertising Factory supervision Property taxes, factory building. $118,000 $50,000 $40,000 $3,500 Insurance, factory Depreciation, administrative office equipment Lease cost, factory equipment.. Indirect materials, factory Depreciation, factory building $2,500 $4,000 $12,000 $6,000 $10,000 $3,000 $60,000 $94,000 $20,000 Administrative office salaries. Direct materials used (wood, bolts, etc.). . . . . Required 1. Prepare an answer sheet with the column headings shown below. Enter each cost item on your answer sheet, placing the dollar 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 also be clasified as either direct or indirect as shown.) Period (Selling or Administrative) Cost Cost Behavior Product Cost Cost Item Direct labor. Advertising. To units of product. Variable Fixed Direct Indirect $118,000 $118,000 $50,000 $50,000 Total the dollar amounts in each of the columns in requirement I above. Compute the average product cost of one patio set. 2. 3. Assume that production drops to only 1,000 sets annually. Would you expect the average product cost per set to increase, decrease, or remain unchanged? Explain. No computations are necessary