Problem 2-24 Cost Classification and Cost Behavior [LO2, LO3, LO6] 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 4,100 bookcases per year. Annual cost data at full capacity follow: Direct materials used (wood and glass) $ 428,000 Administrative office salaries $ 109,000 Factory supervision $ 71,000 Sales commissions $ 56,000 Depreciation, factory building $ 108,000 Depreciation, administrative office equipment $ 2,000 Indirect materials, factory $ 19,000 Factory labor (cutting and assembly) $ 92,000 Advertising $ 102,000 Insurance, factory $ 8,000 Administrative office supplies (billing) $ 4,000 Property taxes, factory $ 16,000 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.) Cost Behavior Selling or Product Cost -------------------------------------------------------------------------------- Administrative -------------------------------------------------------------------------------- Cost Item Variable Fixed Cost Direct Indirect Direct materials used (wood, glass) $ $ $ $ $ Administrative office salaries Factory supervision Sales commissions Depreciation, factory building Depreciation, admin. office equipment Indirect materials, factory Factory labor (cutting and assembly) Advertising Insurance, factory Administrative office supplies (billing) Property taxes, factory Utilities, factory -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Total costs $ $ $ $ $ -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 2. Compute the average product cost per bookcase. (Round your answer to the nearest dollar amount. Omit the "$" sign in your response.) 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? Decrease Remain unchanged Increase eBook Links (3)references Worksheet Difficulty: Medium Learning Objective: 02-03 Understand cost behavior patterns including variable costs, fixed costs, and mixed costs. Problem 2-24 Cost Classification and Cost Behavior [LO2, LO3, LO6] Learning Objective: 02-02 Distinguish between product costs and period costs and give examples of each. Learning Objective: 02-06 Understand the differences between direct and indirect costs.

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