Problem $2-20$ Cost Classification and Cost Behaviour $[$LO$1,$ LO$2,$ LO$5,$ LO$6]$

The Outdoor Dining 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 $1,200$ sets per year. Annual cost data at full capacity follow:

Direct labour $ $130,100$

Advertising $ $41,100$

Factory supervision $ $49,400$

Property taxes, factory building $ $3,400$

Sales commissions $ $59,100$

Insurance, factory $ $2,700$

Depreciation, administrative office equipment $ $3,900$

Lease cost, factory equipment $ $18,900$

Indirect materials, factory $ $4,900$

Depreciation, factory $ $15,900$

Administrative office supplies $ $2,200$

Direct materials used $($wood$,$ bolts, etc.$)$ $ $63,800$

Utilities, factory $ $22,200$

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.$)$

$2.$ Compute the average product cost per patio set. $($Round your answer to $2$ decimal places.$)$

$3.$ Due to reduced demand, assume that production drops to only $1,000$ sets per year. Would you expect the average product cost per patio set to increase, decrease, or remain unchanged?

multiple choice

Increase

Decrease

Remain unchanged

$4.$ This part of the question is not part of your Connect assignment.

$4$