Reference no: EM132553169

The Mahela Company specializes in producing sets of wooden patio furniture consisting of a table and four chairs. The company has ample orders to keep production going at its full capacity of 3,200 sets per quarter.

Quarterly cost data at full capacity follow:

Factory labor, direct$124,000

Advertising 51,200

Factory supervision 41,200

Property taxes, factory building 4,700

Sales commissions 86,000

Insurance, factory 3,700

Depreciation, office equipment 5,200

Lease cost, factory equipment 13,200

Indirect materials, factory 7,200

Depreciation, factory building 11,200

General office supplies (billing) 4,200

General office salaries 66,000

Direct materials used (wood, bolts, etc.) 100,000

Utilities, factory 21,200

Required:

Question 1: Enter the dollar amount of each cost item under the appropriate headings. As examples, this has been done already for the first two items in the preceding list. 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.)

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

Question 3: Assume that production drops to only 1,000 sets quarterly. Would you expect the average product cost per patio set to increase, decrease, or remain unchanged?

Question 4: Refer to the original data. The president's brother-in-law has considered making a patio set and has priced the necessary materials at a building supply store. He has asked the president if he could purchase a patio set from the Mahela Company "at cost," and the president has agreed to let him do so.

a. Would you expect any disagreement over the price the brother-in-law should pay? What price does the president probably have in mind? (Round your answer to 2 decimal places.)