Question The Dorilane 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 4,200 sets per year. Annual cost data at full capacity follow: Direct labor $95,000 www Advertising $104,000 $72,000 Factory supervision Property taxes, factory building $25,000 Sales commissions Insurance, factory $61,000 $8,000 Depreciation, administrative office equipment $3,000 Lease cost, factory equipment $15,000 Indirect materials, factory $21,000 Depreciation, factory building $104,000 Administrative office supplies (billing) $4,000 Administrative office salaries $106,000 Direct materials used (wood, bolts, etc.) $430,000 Utilities, factory $47,000 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 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.) 2. Compute the average product cost of one patio set. 3. Assume that production drops to only 1,000 sets annually. Would you expect the average product cost per set to increase, decrease, or remain unchanged?
Question The Dorilane 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 4,200 sets per year. Annual cost data at full capacity follow: Direct labor $95,000 www Advertising $104,000 $72,000 Factory supervision Property taxes, factory building $25,000 Sales commissions Insurance, factory $61,000 $8,000 Depreciation, administrative office equipment $3,000 Lease cost, factory equipment $15,000 Indirect materials, factory $21,000 Depreciation, factory building $104,000 Administrative office supplies (billing) $4,000 Administrative office salaries $106,000 Direct materials used (wood, bolts, etc.) $430,000 Utilities, factory $47,000 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 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.) 2. Compute the average product cost of one patio set. 3. Assume that production drops to only 1,000 sets annually. Would you expect the average product cost per set to increase, decrease, or remain unchanged?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The Dorilane 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 4,200 sets per year. Annual cost data at full capacity follow:
Direct labor
$95,000
www
Advertising
$104,000
$72,000
Factory supervision
Property taxes, factory building $25,000
Sales commissions
Insurance, factory
$61,000
$8,000
Depreciation, administrative office equipment $3,000
Lease cost, factory equipment $15,000
Indirect materials, factory
$21,000
Depreciation, factory building
$104,000
Administrative office supplies (billing)
$4,000
Administrative office salaries
$106,000
Direct materials used (wood, bolts, etc.) $430,000
Utilities, factory $47,000
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 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.)
2. Compute the average product cost of one patio set.
3. Assume that production drops to only 1,000 sets annually. Would you expect the average product cost
per set to increase, decrease, or remain unchanged?
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