Heritage Company manufactures a beautiful bookcase that enjoys - 17805

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yousafbhutta

yousafbhutta

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  • From: Business,
  • Posted on: Sun 09 Jun, 2013
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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 4,000 bookcases per year. Annual cost data at full capacity follow:

 

  

  Direct materials used (wood and glass)

$

430,000   

  Administrative office salaries

$

110,000   

  Factory supervision

$

70,000   

  Sales commissions

$

60,000   

  Depreciation, factory building

$

105,000   

  Depreciation, administrative office equipment

$

2,000   

  Indirect materials, factory

$

18,000   

  Factory labor (cutting and assembly)

$

90,000   

  Advertising

$

100,000   

  Insurance, factory

$

6,000   

  Administrative office supplies (billing)

$

4,000   

  Property taxes, factory

$

20,000   

  Utilities, factory

$

45,000   


 

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.)

2.

Compute the average product cost per bookcase. (Omit the "$" sign in your response.)

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?

 

Solution Description
“Do not hire a man who does your work for money, but him who does it for love of it.”

 

 

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Ch 2 Q3.docx
Ch 2 Q3.docx