The Mahela Company specializes in producing sets of wooden patio furniture consisting of a table and four chairs. The company is currently operating at 80% of its full capacity of 2.000 sets per quartet Quarterly cost data at this level of operations follow Factory labour, direct Advertising Factory supervision Property taxes, factory building Sales Comissions Insurance, factory Depreciation, office equipment Lease cost, factory equipment Indirect materials, factory Depreciation, factory building General office supplies (line) General office salaries Direct materials used (wood, bolts, etc.) utilities, factory $110,000 50.000 40,000 1,500 10,000 2.500 4,000 12,000 6.000 10,000 1.000 60,000 94,000 20.000 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. llist, 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 procact cost it should also be classified as either direct or indirect as shown) Product Cost Direct Indirect 118 000 Cost Behaviour Selling and Administrative Variable Fixed Cost 5 118.000 50.000 50.000 Cost Item Factory about direct Advertising Factory supervision $ 20C Mostly O II C e to search A 10000 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) Cost Behaviour Selling and Variable Administrative Fixed Cost $ 118,000 50,000 50,000 Product Cost Direct Indirect 118.000 S Cost Item 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 ing) General office salaries Direct materials used (wood, bolts, etc) Utilities factory Total costs "To units of product S 118.000 $ 50.000 50,000 $ 118.000 $ 0 2. Based on the answers obtained in Requirement (1), compute the average product cost per patio set. (Round your answer to 2 decimal places.) Averno prodext cost per patio set 3. Assume that production increases to only 1800 sets quarterly. Would you expect the average product cost per patio set to increase. decrease or remain unchanged? Increase O Decrease Remain unchanged 4. Refer to the original data. The president's brother in law has considered making a patio set and has piked 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 . 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 present may expect a mommier b. Since the company is operating below its full capacity, what cost term used in the chapter might be the most applicable in this situation? Opportunity cost Sunk cost Relevant cost
