Question

#1

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	$	91,000
Advertising	$	102,000
Factory supervision	$	67,000
Property taxes, factory building	$	18,000
Sales commissions	$	60,000
Insurance, factory	$	6,000
Depreciation, administrative office equipment	$	2,000
Lease cost, factory equipment	$	20,000
Indirect materials, factory	$	18,000
Depreciation, factory building	$	104,000
Administrative office supplies (billing)	$	3,000
Administrative office salaries	$	113,000
Direct materials used (wood, bolts, etc.)	$	431,000
Utilities, factory	$	48,000

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.)

Answer 1

ans 1 Classification
	Cost behavior		Selling &	Product cost
	Variable	Fixed	Adm cost	Direct	Indirect
Direct labor	$91,000			$91,000
Advertising		102000	102000
Factory supervision		67000			67000
Property taxes, factory building		18000			18000
Sales commissions	60000		60000
Insurance, factory		6000			6000
Depreciation, administrative office equipment		2000	2000
Lease cost, factory equipment		20000			20000
Indirect materials, factory	18000				18000
Depreciation, factory building		104000			104000
Administrative office supplies (billing)	3000		3000
Administrative office salaries		113000	113000
Direct materials used (wood, bolts, etc.)	431000			431000
Utilities, factory	48000				48000
Total	$651,000	$432,000	$280,000	$522,000	$281,000
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