The Dorilane Company produces a set of wood patio furniture consisting of a tabl
ID: 2586808 • Letter: T
Question
The Dorilane Company produces a set of wood patio furniture consisting of a table and four chairs. The company has enough customer demand to justify producing its full capacity of 2.000 sets per year. Annual cost data at full capacity follow 18,000 50,000 40,000 3,500 80,000 2,500 4,000 12,000 6,000 0,000 3,000 60,000 94,000 Direct labor Factory supervision Property taxes, factory buildi Sales commissions Insurance, factory Depreciation, administrative office equipment Lease cost, factory equipment Indircct materials, factory Depreciation, factory building Administrative office supplies (billing) Administrative oftice salaries Direct mate sed (wood, bolts, etc.) Utilities Required: . 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 p t cost, it should also be classified as either direct or indirect 2. Compute the average product cost of one patio set Cost Behavior Period (Selling or Product Cost Cost Direct labor Factory supervision Property taxes, factory Sales commissions dministrative office ease cost, factory Indirect materials, factory Direct materials used wood, bolts, etc) Utilitics, factoryExplanation / Answer
Answer:
1
Period
cost
Product
cost
Cost Item
Variable
Fixed
Selling
/admin Cost
Direct
Indirect
Direct labor
$118,000
$118,000
Advertising
50,000
50,000
Factory supervision
40,000
40,000
Property taxes, factory building
3,500
3,500
Sales commissions
80,000
80,000
Insurance, factory
2,500
2,500
Depreciation, administrative office equipment
4,000
4,000
Lease cost, factory equipment
12,000
12,000
Indirect materials, factory
6,000
6,000
Depreciation, factory building
10,000
10,000
Administrative office supplies (billing)
3,000
3,000
Administrative office salaries
60,000
60,000
Direct materials used (wood, bolts, etc.)
94,000
94,000
Utilities, factory
20,000
20,000
Total costs
$321,000
$182,000
$197,000
$212,000
$94,000
______________________________________
2
Compute the average product cost of one patio set
Direct cost
$212,000
Add: Indirect cost
$94,000
Total cost`
$306,000
average product cost of one patio set
(306000/2000 sets)
153
product cost of one patio set =$153
Period
cost
Product
cost
Cost Item
Variable
Fixed
Selling
/admin Cost
Direct
Indirect
Direct labor
$118,000
$118,000
Advertising
50,000
50,000
Factory supervision
40,000
40,000
Property taxes, factory building
3,500
3,500
Sales commissions
80,000
80,000
Insurance, factory
2,500
2,500
Depreciation, administrative office equipment
4,000
4,000
Lease cost, factory equipment
12,000
12,000
Indirect materials, factory
6,000
6,000
Depreciation, factory building
10,000
10,000
Administrative office supplies (billing)
3,000
3,000
Administrative office salaries
60,000
60,000
Direct materials used (wood, bolts, etc.)
94,000
94,000
Utilities, factory
20,000
20,000
Total costs
$321,000
$182,000
$197,000
$212,000
$94,000
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