The Dorilane Company specializes in producing a set of wood patio furniture consisting of a table and fourchairs. The set enjoys great popularity, and the company has ample orders to keep production going at itsfull capacity of 2,000 sets per year. Annual cost data at full capacity follow:Factory labor, direct ................................................ $118,000Advertising .............................................................. $50,000Factory supervision ................................................. $40,000Property taxes, factory building ............................... $3,500Sales commissions ................................................. $80,000Insurance, factory ................................................... $2,500Depreciation, administrative office equipment ........ $4,000Lease cost, factory equipment ................................ $12,000Indirect materials, factory ........................................ $6,000Depreciation, factory building ................................. $10,000Administrative office supplies (billing) ..................... $3,000Administrative office salaries .................................. $60,000Direct materials used (wood, bolts, etc.) ................. $94,000Utilities, factory ........................................................ $20,000Required:1. Prepare an answer sheet with the column headings shown below. Enter each cost item on your answersheet, placing the dollar amount under the appropriate headings. As examples, this has been donealready for the first two items in the list above. 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 andadministrative cost or a product cost. (If the item is a product cost, it should also be classified as eitherdirect or indirect as shown.)
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 2,000 sets per year. Annual cost data at full capacity follow:
Factory labor, direct ................................................ $118,000
Advertising .............................................................. $50,000
Factory supervision ................................................. $40,000
Property taxes, factory building ............................... $3,500
Sales commissions ................................................. $80,000
Insurance, factory ................................................... $2,500
Depreciation, administrative office equipment ........ $4,000
Lease cost, factory equipment ................................ $12,000
Indirect materials, factory ........................................ $6,000
Depreciation, factory building ................................. $10,000
Administrative office supplies (billing) ..................... $3,000
Administrative office salaries .................................. $60,000
Direct materials used (wood, bolts, etc.) ................. $94,000
Utilities, factory ........................................................ $20,000
Required:
1. Prepare an answer sheet with the column headings shown below. Enter each cost item on your answer
sheet, placing the dollar amount under the appropriate headings. As examples, this has been done
already for the first two items in the list above. 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.)
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