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Case: The Dial Company specializes in producing a set of wood patio furniture consisting of a table and four chairs. The set enjoys great
Case: The Dial 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 10,000 sets per year. Annual cost data at full capacity follow: The patio set areally sold for $500 per set. Dal can inese pocity by 500 A cod data for the production of 10,000 ca For the following questions, please use the information on pages 1 and 2 to help support your decisions. Please document your answer in a clear, concise way and reference any numbers that were used to make your decision. Each question is independent and refers to the original data unless specified otherwise. For each question, please use up to 100 words. Each question is worth 7 points for a total of 28 points. 1) Please prepare a contribution margin income statement at normal capacity and label the income statement as Figure 1. Please show the following format and show columns for totals and per unit. Assume that sales are priced at the normal price. Variable C Operating I Talat 10,000 Por 2) Do total fixed costs change if units change from 8,000 to 9,000 units? Why or why not? Please mention the concept of relevant range in your answer. What is the variable cost per unit and what are the total variable costs for 10,000 units? Please explain your calculations and reference to the chart in Figure 1. 3) If demand for 2023 is instead 10,500 units should the company pay to increase their capacity? Why? Please explain your calculations and reference to the chart in Figure 1. Assume units are sold at the normal price. Please mention the concept of incremental profits.
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