requirement 3 asks you to explain (without making computations) whether the average cost will increase or decrease when production drops from 2,000 units to 1,000 units. i need to make the calculations of the expected cost of making 1,000 units.

de CASE 1-26 Cost Classification and Cost Behavior L01-1, L01-2, L01-3, LO1-4 The Dorilane Company produces a set of wood patio furniture consisting of a table and four chairs. The company has enough customer demand to justify producing its full capacity of 2,000 sets per year. Annual cost data at full capacity follow: Chapter 1 ASTM Direct labor... Advertising Factory supervision... Property taxes, factory building Sales commissions Insurance, factory Depreciation, administrative office equipment. Lease cost, factory equipment Indirect materials, factory... Depreciation, factory building.. Administrative office supplies (billing). Administrative office salaries.... Direct materials used (wood, bolts, etc.) Utilities, factory 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 either direct or indirect as shown.) $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 Cost Behavior Variable Fixed Period (Selling or Administrative) Cost Cost Item Product Cost Direct Indirect $118,000 Direct labor Advertising $118,000 $50,000 $50,000 * To units of product. 2. Total the dollar amounts in each 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, 4. Refer to the original data. The president's brother-in-law has considered moli