Heritage Company manufactures a beautiful bookcase that enjoys widespread popularity. The company has a backlog of orders that is large enough to keep production going indefinitely at the plant's full capacity of 3,900 bookcases per year. Annual cost data at full capacity follow:
| |
| Direct materials used (wood and glass) |
$ |
426,000 |
| Administrative office salaries |
$ |
108,000 |
| Factory supervision |
$ |
72,000 |
| Sales commissions |
$ |
60,000 |
| Depreciation, factory building |
$ |
102,000 |
| Depreciation, administrative office equipment |
$ |
2,000 |
| Indirect materials, factory |
$ |
20,000 |
| Factory labor (cutting and assembly) |
$ |
93,000 |
| Advertising |
$ |
96,000 |
| Insurance, factory |
$ |
5,000 |
| Administrative office supplies (billing) |
$ |
5,000 |
| Property taxes, factory |
$ |
21,000 |
| Utilities, factory |
$ |
43,000 |
|
| 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 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.) (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)
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Cost Behavior |
Selling or |
Product Cost |
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Administrative |
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| Cost Item |
Variable |
Fixed |
Cost |
Direct |
Indirect |
| Direct materials used (wood, glass) |
$ |
$ |
$ |
$ |
$ |
| Administrative office salaries |
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| Factory supervision |
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| Sales commissions |
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| Depreciation, factory building |
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| Depreciation, admin. office equipment |
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| Indirect materials, factory |
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| Factory labor (cutting and assembly) |
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| Advertising |
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| Insurance, factory |
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| Administrative office supplies (billing) |
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| Property taxes, factory |
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| Utilities, factory |
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| Total costs |
$ |
$ |
$ |
$ |
$ |
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| 2. |
Compute the average product cost per bookcase. (Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)
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| Average product cost |
$ |
per bookcase |
| 3. |
Due to a recession, assume that production drops to only 2,000 bookcases per year. Would you expect the average product cost per bookcase to increase, decrease, or remain unchanged?
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Decrease |
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Increase |
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Remain unchanged |
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