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 3,800 sets per quarter. Quarterly cost data at this level of operations follow. 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, etc.) Utilities, factory $127,000 51,800 41,800 5,300 89,000 4,300 5,800 13,800 7,800 11,800 4,880 69,000 103,000 21,800 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 Variable Fixed s 127.000 Selling and Administrative Cost Product Cost Direct Indirect 127.000 Cost Item Factory labour direct s search Help Save & Exit 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 Administrative Cont Fixed Variable $ 127,000 Indirect Direct 127,000 $ 51,800 51,800 Cost tem 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, etc.) Utilities, factory Total costs "To units of product $ 127.000 $ 51,800 $ 51,800 $ 127.000 5 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.) Average product cost per patio set 3. Assume that production increases to only 3,420 sets quarterly. Would you expect the average product cost per patio set to increase, decrease, or remain unchanged? O Increase O Decrease O 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? IRound your answer to decimal ninces) 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 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? O Opportunity cost 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.) 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? O Opportunity cost O Sunk cost O Relevant cost
