that is very popular The company has sufficient to keep prod

that is very popular. The company has sufficient to keep production going indefinitely at Annual cost data at full capacity follow General office salaries Sales commis Depreciation, office equipment Factory labour (cutting and assembly) $440,000 12,000 84,000 64,000 116,000 2,600 20,000 100,000 120,000 7,000 5,400 24,000 55,000 Property taxes, factory Required: 1. Enter the dollar amount of each cost item under the appropriate headings. Note that each cost item is classified in twb ways: first, as either variable or fixed with respect to the number of units produced and sold and, second, as either 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 Fixed Indi Direct materials used (wood and glass) Factory supervision Depreciation, office equipment Indirect ma Factory labour (cutting and Advertising Insurance, factory factory

Solution

Answer 1. Cost Behaviour Selling & Administrative Costs Product Cost Variable Fixed Direct Indirect Direct Material Used (wood & Glass)       440,000.00    440,000.00 General Office salaries 112,000.00              112,000.00 Factory Supervision      84,000.00       84,000.00 Sales Commission         64,000.00                64,000.00 Depreciation, factory building 116,000.00    116,000.00 Depreciation, office equipment        2,600.00                  2,600.00 Indirect Materials, Factory         20,000.00       20,000.00 Factory labor (cutting & assembly)       100,000.00    100,000.00 Advertising 120,000.00              120,000.00 Insurance Factory        7,000.00         7,000.00 General Office supplies (billings)            5,400.00                  5,400.00 Property Taxes, Factory      24,000.00       24,000.00 Utilities, factory         55,000.00         5,500.00 Total Costs       684,400.00 465,600.00              304,000.00    540,000.00    256,500.00 Answer 2. Total Product Cost = $540,000 (Direct Product Costs) + $256,500 (Indirect Fixed Costs) Total Product Cost = $796,500 Average Product Cost = $796,500 (Total Product Costs) / 6,000 Nos (No. of Bookcase produced) Average Product Cost = $132.75 per bookcase Answer 3. Yes Average cost per bookcase will increase due to fixed cost. Answer 4 a-1. Yes Answer 4 a-2. Direct Product Costs.