The Outdoor Dining 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 2,100 sets per year. Annual cost data at full capacity follow:

Direct labour	$	174,800
Advertising	$	37,300
Factory supervision	$	43,000
Property taxes, factory building	$	4,000
Sales commissions	$	51,500
Insurance, factory	$	3,200
Depreciation, administrative office equipment	$	3,500
Lease cost, factory equipment	$	15,300
Indirect materials, factory	$	4,200
Depreciation, factory	$	15,300
Administrative office supplies	$	2,300
Direct materials used (wood, bolts, etc.)	$	46,900
Utilities, factory	$	23,60

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 either variable or fixed with respect to the number of units produced and sold, and second, as either 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.)

	Cost Behavior		Selling and Administrative Cost	Product Cost
Cost Item	Variable	Fixed		Direct	Indirect
Direct labour
Advertising
Factory supervision
Property taxes, factory building
Sales commissions
Insurance, factory
Depreciation, administrative office equipment
Lease cost, factory equipment
Indirect materials, factory
Depreciation, factory
Administrative office supplies
Direct materials used (wood, bolts, etc.)
Utilities, factory
Total costs	$0	$0	$0	$0	$0

2. Compute the average product cost per patio set. (Round your answer to 2 decimal places.)

3. Due to reduced demand, assume that production drops to only 1,000 sets per year. Would you expect the average product cost per patio set to increase, decrease, or remain unchanged?

multiple choice

• Increase

• Decrease

• Remain unchanged