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 2,000 sets per year. Annual cost data at full capacity follow: Direct labor $ 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. 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.) (If your answer is zero, leave the cell blank.)

Answer 1

Solution:

Dorilane COMPANY
Schedule of Cost of Goods
Particulars	Variable Cost		Fixed Cost
	Per Unit	Total
Product Cost:
Direct Material	$47.00	$94,000.00
Direct Labor	$59.00	$118,000.00
Indirect - Factory Supervision			$40,000.00
Indirect - Property Taxes Factory Building			$3,500.00
Indirect - Insurance Factory			$2,500.00
Indirect - Lease Cost Factory Equipment			$12,000.00
Indirect Material	$3.00	$6,000.00
Indirect - Depreciation Factory Building			$10,000.00
Direct - Utilities Factory	$10.00	$20,000.00
Total Product Cost	$119.00	$238,000.00	$68,000.00
Selling & Adminstraton Cost :
Advertising			$50,000.00
Sales Commission	$40.00	$80,000.00
Depreciation - Administrative office equipment			$4,000.00
Administrative office supplies			$3,000.00
Administrative office Salaries			$60,000.00
Total Selling & Administration Cost	$40.00	$80,000.00	$117,000.00