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PROBLEM 2-10 Cost Clhoolhcation and Cont Behavlor (LO2, LOB, LOGI The Dorlane Conmpany speclalizes in producing u set of wood patlo furniture consisting of a table and four chnirs. The Not enjoys great popularity, and the company has ample orders to keep produc hon going at Its full capacity of 2,000 sets per yenr. Annual cost data at full capacity follow: Factory labor, direct.. Advortising... Factory suporvision Proporty taxos, tactory bulding Salos commlsslons Insuranco, factory... Doproclation, administrative office oqulpment.. Loaso cost, factory oqulpmont. . Indiroct matorials, factory... Doproclation, factory bullding Adminlstrativo offlco supplles (billing) Àdministratlvo office salarlos..... Direct matorlals used (wood, bolts, otc.) Utilitles, factory... $118,000 $50,000 $40,000 $3,500 $80,000 $2,500 $4,000 $12,000 $6,000 $10,000 $3,000 $60,000 $94,000 $20,000 Required: 1. Prepare an answer sheet with the column headings shown below. Enter each cost item on your answer sheet, placing the dollar amount under the appropriate headings. As examples, this has been done already for the first two items in the list above. 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 cither direct or indirect as shown.) Selling or Administrative Cost Cost Bohavlor Product Cost Cost Item Varlable Flxed Direct Indirect Factory labor, diroct... Advertising. $118,000 $118,000 $50,000 $50,000 "To units of product. 2. Total the dollar amounts in cach of the columns in (1) above. Compute the average product cost of one patio set. 3. Assume that production drops to only 1,000 sets annually. Would you expect the average product cost per set to increase, decrease, or remain unchanged? Explain. No computations are necessary,

PROBLEM 2-10 Cost Clhoolhcation and Cont Behavlor (LO2, LOB, LOGI The Dorlane Conmpany speclalizes in producing u set of wood patlo furniture consisting of a table and four chnirs. The Not enjoys great popularity, and the company has ample orders to keep produc hon going at Its full capacity of 2,000 sets per yenr. Annual cost data at full capacity follow: Factory labor, direct.. Advortising... Factory suporvision Proporty taxos, tactory bulding Salos commlsslons Insuranco, factory... Doproclation, administrative office oqulpment.. Loaso cost, factory oqulpmont. . Indiroct matorials, factory... Doproclation, factory bullding Adminlstrativo offlco supplles (billing) Àdministratlvo office salarlos..... Direct matorlals used (wood, bolts, otc.) Utilitles, factory... $118,000 $50,000 $40,000 $3,500 $80,000 $2,500 $4,000 $12,000 $6,000 $10,000 $3,000 $60,000 $94,000 $20,000 Required: 1. Prepare an answer sheet with the column headings shown below. Enter each cost item on your answer sheet, placing the dollar amount under the appropriate headings. As examples, this has been done already for the first two items in the list above. 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 cither direct or indirect as shown.) Selling or Administrative Cost Cost Bohavlor Product Cost Cost Item Varlable Flxed Direct Indirect Factory labor, diroct... Advertising. $118,000 $118,000 $50,000 $50,000 "To units of product. 2. Total the dollar amounts in cach of the columns in (1) above. Compute the average product cost of one patio set. 3. Assume that production drops to only 1,000 sets annually. Would you expect the average product cost per set to increase, decrease, or remain unchanged? Explain. No computations are necessary,

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The Dorllane Compuny specializes in producing a set of wood patio furniture consisting of a table PROBLEM 2-10 Cost Clhoolicatlon nnd Cont Bohavlor (LO2, LOB, LOOI The Dorllane Compuny specializen in prolucing u ket of wood patio furniture consisting of a table and four chairs. Tho sot enjoys grent popularity, und the company has ample orders to keep produc thon going at its full eapacity of 2,000 sets per yenr, Annual cost data at full capacity follow: $118,000 $50,000 $40,000 $3,500 $80,000 $2,500 $4,000 $12,000 $6,000 $10,000 $3,000 $60,000 $94,000 $20,000 Factory Inbor, direct.. Advortlsing.. Fnotory auporvision Proporty taxes, taotory bullding Salos commisslons Insuranco, factory. .. Doproclation, administrativo offlco oqulpment. Loaso cost, factory oqulpmont. Indiroct matorials, factory.... Doproclatlon, factory bullding ..... Adminlstrativo offlco supplies (billing) Ádministrativo offico salarios . Direct matorlals used (wood, bolts, atc.) Utlitles, factory. . .. Required: 1. Propare an answer sheet with the column headings shown below. Enter each cost item on your answer sheet, placing the dollar amount under the appropriate headings. As examples, this has been done already for the first two items in the list above, 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 as shown.) 冰 Selling or Administrative Cost Cost Bohavlor Product Cost Cost Item Variable Fxed Direct Indirect Factory labor, diroct.... $118,000 Advertising. $118,000 .....'.... $50,000 $50,000 *To units of product. 2. Total the dollar amounts in cach of the columns in (1) above. Compute the average product .cost of one patio set. Assume that production drops to only 1,000 sets annually. Would you expect the average product cost per set to increase, decrease, or remain unchanged? Explain. No computations are necessary, 4. Refer to the original data. The president's brother-in-law has considered making himself a patlo set and has prlced the necessary materials at a building supply store. The brother-in-law has asked the presldent if he could purchase a patio set from the Dorilane Company "at cost," and the president agreed to let him do so.
Transcribed Image Text:The Dorllane Compuny specializes in producing a set of wood patio furniture consisting of a table PROBLEM 2-10 Cost Clhoolicatlon nnd Cont Bohavlor (LO2, LOB, LOOI The Dorllane Compuny specializen in prolucing u ket of wood patio furniture consisting of a table and four chairs. Tho sot enjoys grent popularity, und the company has ample orders to keep produc thon going at its full eapacity of 2,000 sets per yenr, Annual cost data at full capacity follow: $118,000 $50,000 $40,000 $3,500 $80,000 $2,500 $4,000 $12,000 $6,000 $10,000 $3,000 $60,000 $94,000 $20,000 Factory Inbor, direct.. Advortlsing.. Fnotory auporvision Proporty taxes, taotory bullding Salos commisslons Insuranco, factory. .. Doproclation, administrativo offlco oqulpment. Loaso cost, factory oqulpmont. Indiroct matorials, factory.... Doproclatlon, factory bullding ..... Adminlstrativo offlco supplies (billing) Ádministrativo offico salarios . Direct matorlals used (wood, bolts, atc.) Utlitles, factory. . .. Required: 1. Propare an answer sheet with the column headings shown below. Enter each cost item on your answer sheet, placing the dollar amount under the appropriate headings. As examples, this has been done already for the first two items in the list above, 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 as shown.) 冰 Selling or Administrative Cost Cost Bohavlor Product Cost Cost Item Variable Fxed Direct Indirect Factory labor, diroct.... $118,000 Advertising. $118,000 .....'.... $50,000 $50,000 *To units of product. 2. Total the dollar amounts in cach of the columns in (1) above. Compute the average product .cost of one patio set. Assume that production drops to only 1,000 sets annually. Would you expect the average product cost per set to increase, decrease, or remain unchanged? Explain. No computations are necessary, 4. Refer to the original data. The president's brother-in-law has considered making himself a patlo set and has prlced the necessary materials at a building supply store. The brother-in-law has asked the presldent if he could purchase a patio set from the Dorilane Company "at cost," and the president agreed to let him do so.
Cost Concepts Would you expect any disagreement between the two men over the price the brother-in- a. law should pay? Explain. What price does the president probably have in mind? The brother-in-law? b. Bečause the company is operating at full capacity, what cost term used in the chapter might be justification for the president to charge the full, regular price to the brother-in-law and still be selling "at cost"?
Transcribed Image Text:Cost Concepts Would you expect any disagreement between the two men over the price the brother-in- a. law should pay? Explain. What price does the president probably have in mind? The brother-in-law? b. Bečause the company is operating at full capacity, what cost term used in the chapter might be justification for the president to charge the full, regular price to the brother-in-law and still be selling "at cost"?
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