Problem 2-25 Cost Classification and Cost Behavior [LO2-1, LO2-2, LO2-3, LO2-4] 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 production going at its full capacity of 4,000 sets per year. Annual cost data at full capacity follow: $ $ Direct labor Advertising Factory supervision Property taxes, factory building Sales commissions Insurance, factory Depreciation, administrative office equipment Lease cost, factory equipment Indirect materials, factory Depreciation, factory building Administrative office supplies (billing) Administrative office salaries Direct materials used (wood, bolts, etc.) Utilities, factory 89,000 102,000 74,000 21,000 63,000 8,000 2,000 14,000 21,000 106,000 5,000 111,000 433,000 46,000 $ $ $ Required: 1. Enter the dollar amount of each cost item under the appropriate headings. 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 classified as either direct or indirect.) (If your answer is zero, leave the cell blank.) $ $ $ $ $ U Direct labor Advertising Factory supervision Property taxes, factory building Sales commissions Insurance, factory Depreciation, administrative office equipment Lease cost, factory equipment Indirect materials, factory Depreciation, factory building Administrative office supplies (billing) Administrative affice salaries Direct materials used (wood, bolts, etc.) Utilities, factory 89,000 102,000 74,000 21,000 63,000 8,000 2,000 14,000 21,000 106,000 5,000 111,000 433,000 46,000 9 $ $ $ Required: 1. Enter the dollar amount of each cost item under the appropriate headings. 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 classified as either direct or indirect.) (If your answer is zero, leave the cell blank.) Period (Selling Cost Behavior or Product Cost Administrative) Cost Variable Fixed Direct Indirect Cost Item Direct labor Advertising Factory supervision Property taxes, factory building Sales commissions Insurance, factory Depreciation, administrative office equipment Lease cost, factory equipment Indirect materials, factory Depreciation, factory building Administrative office supplies (biling) Administrative office salaries Direct materials used (wood, bolts, etc.) Utilities, factory Total costs 2. Compute the average product cost of one patio set. (Round your answer to nearest whole dollar.) Average product cost per set 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? O Increase O Decrease O Remain unchanged
