The Mahela Company specializes in producing sets of wooden patio furniture consisting of a table and four chairs. The company has ample orders to keep production going at its full capacity of 3,500 sets per quarter. Quarterly cost data at full capacity follow: Factory labour, direct Advertising Factory supervision roperty taxes, factory building Sales commissions Insurance, factory Depreciation, office equipment Lease cost, factory equipment Indirect materials, factory Depreciation, factory building General office supplies (billing) General office salaries Direct materials used (wood, bolts, etc.) Utilities, facto $125,500 51,500 41,500 5,000 87,500 4,000 5,500 13,500 7,500 11,500 4,500 67,500 101,500 21,500 Required 1. Enter the dollar amount of each cost item under the appropriate headings. As examples, this has been done already for the first two 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 also be classified as either direct or indirect as shown.) Required 1. Enter the dollar amount of each cost item under the appropriate headings. As examples, this has been done already for the first two 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 also be classified as either direct or indirect as shown.) Answer is complete and correct Selling and Administrative Cost Cost Behaviour Product Cost Cost Item Variable Fixed Direct Indirect* Factory labour, direct Advertising Factory supervision Property taxes, factory building Sales commissions Insurance, factory Depreciation, office equipment Lease cost, factory equipment Indirect materials, factory Depreciation, factory building General office supplies (billing) General office salaries Direct materials used (wood, bolts $ 125,500 $ 125,500 51,500 41,500 5,000 51,500 41,500 5,000 87,500 87,500 4,000 5,500 13,500 4,000 5,500 13,500 7,500 11,500 7,500 11,500 4,500 4,500 67,500 67,500 101,500 21,500 $ 348,000 101,500 etc Utilities, factory Total costs To units of product. 21,500 200,000 S 216,500 227,000 104,500 Compute the average product cost per patio set. (Round your answer to 2 decimal places.) Average product cost per patio set 3. Assume that production drops to only 1,000 sets quarterly. Would you expect the average product cost per patio set to increase, decrease, or remain unchanged? Increase Decrease 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
