P1-A Cost Identification The Walnut Company specializes in producing a set of wood patio furniture consisting of a a table and four chairs. The set enjoys great popularity and the company has orders for 10,000 sets per year. Annual cost data, at this level of production, follows. 40,000 Advertising Factory labor, direct Salaries, office 130,000 90,000 45,000 Depreciation, factory Office supplies (billing) 5,000 150,000 Sales commissions 65,000 Utilities, factory 80,000 Direct materials used 20,000 Rent, office 10,000 Insurance, factory 20,000 Indirect labor 50,000 Property taxes, factory Depreciation, office equip 15,000 Required 1) Prepare an answer sheet with the column headings shown below. Enter each dollar amount, on your answer sheet, in two columns. Each amount will be placed in either the variable or fixed column and each amount will be placed in one of the three columns to the right. Indirect product cost overhead. Selling or Administrative Cost Behavior Variable Fixed Product Cost Cost Direct Indirect (OH) s 40,000 40,000 Advertising Factory labor, direct 130,000 $130,000 2) Total each column. 3) Compute the average cost to make one patio set. 4) If production dropped, from its current level of 10,000 sets to 8,000 sets, would you expect the cost to make one set to increase, decrease, or stay the same? Why