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Homework answers / question archive / The Outdoor Dining Company specializes in producing a set of wood patio furniture consisting of a table and four chairs

The Outdoor Dining Company specializes in producing a set of wood patio furniture consisting of a table and four chairs

Accounting

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 3,800 sets per year. Annual cost data at full capacity follow: 
Direct labour $ 94,000 Advertising $100,000 Factory supervision $ 72,000 Property taxes, factory building $ 25,000 Sales commissions $ 58,000 Insurance, factory $ 8,000 Depreciation, administrative office equipment $ 3,000 Lease cost, factory equipment $ 17,000 Indirect materials, factory $ 20,000 Depreciation, factory $109,000 Administrative office supplies $ 6,000 Direct materials used (wood, bolts, etc.) $433,000 Utilities, factory $ 49,000 
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.) 
Cost Behavior Selling or Administrative Product Cost Cost Item Variable Fixed Cost 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 building Administrative office supplies Direct materials used Utilities, factory Total costs 
 

2. Compute the average product cost per patio set. (Round your answer to nearest whole dollar.) 
Average product cost 
per set 
3. 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? 
O Increase O Decrease O Remain unchanged 
 

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