Water Technology, Inc., incurred the following costs during 20x1. The company sold all of its products...

 

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Water Technology, Inc., incurred the following costs during 20x1. The company sold all of its products manufactured during the year. Direct material Direct labor $3,000,000 2,200,000 Manufacturing overhead: Utilities (primarily electricity) 140,000 Depreciation on plant and equipment 230,000 Insurance 160,000 Supervisory salaries 300,000 Property taxes 210,000 Selling costs: Advertising Sales commissions 195,000 90,000 Administrative costs: Salaries of top management and staff Office supplies 372,000 40,000 Depreciation on building and equipment 80,000 During 20x1, the company operated at about half of its capacity, due to a slowdown in the economy. Prospects for 20x2 are slightly better. Jared Lowes, the marketing manager, forecasts a 20 percent growth in sales over the 20x1 level. Required: Categorize each of the costs listed above as to whether it is most likely variable or fixed. Forecast the 20x2 cost amount for each of the cost items listed above. Water Technology, Inc., incurred the following costs during 20x1. The company sold all of its products manufactured during the year. Direct material Direct labor $3,000,000 2,200,000 Manufacturing overhead: Utilities (primarily electricity) 140,000 Depreciation on plant and equipment 230,000 Insurance 160,000 Supervisory salaries 300,000 Property taxes 210,000 Selling costs: Advertising Sales commissions 195,000 90,000 Administrative costs: Salaries of top management and staff Office supplies 372,000 40,000 Depreciation on building and equipment 80,000 During 20x1, the company operated at about half of its capacity, due to a slowdown in the economy. Prospects for 20x2 are slightly better. Jared Lowes, the marketing manager, forecasts a 20 percent growth in sales over the 20x1 level. Required: Categorize each of the costs listed above as to whether it is most likely variable or fixed. Forecast the 20x2 cost amount for each of the cost items listed above.

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Cost Categorization and Forecast for Water Technology Inc Cost Category 20x1 Cost Variable or Fixed Forecast for 20x2 20 Sales Growth Direct Material ... View the full answer