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Water Technology, Inc. incurred the following costs during 20x1. The company sold all of its products manufactured during the year. Direct material $ $6,000,000 Direct
Water Technology, Inc. incurred the following costs during 20x1. The company sold all of its products manufactured during the year.
Direct material | $ | $6,000,000 | |
Direct labor | 2,300,000 | ||
Manufacturing overhead: | |||
Utilities (primarily electricity) | 130,000 | ||
Depreciation on plant and equipment | 230,000 | ||
Insurance | 170,000 | ||
Supervisory salaries | 300,000 | ||
Property taxes | 210,000 | ||
Selling costs: | |||
Advertising | 185,000 | ||
Sales commissions | 70,000 | ||
Administrative costs: | |||
Salaries of top management and staff | 372,000 | ||
Office supplies | 50,000 | ||
Depreciation on building and equipment | 75,000 | ||
During 20x1, the company operated at about half of its capacity, due to a slowdown in the economy. Prospects for 20x2 are slightly better. Jared Lowes, the marketing manager, forecasts a 20 percent growth in sales over the 20x1 level.
Required:
Categorize each of the costs listed below as to whether it is most likely variable or fixed. Forecast the 20x2 cost amount for each of the cost items listed.
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