The Dorilane Company produces a set of wood patio furnitureconsisting of a table and four chairs. The company has enoughcustomer demand to justify producing its full capacity of 4,200sets per year. Annual cost data at full capacity follow: Directlabor $ 86,000 Advertising $ 102,000 Factory supervision $ 73,000Property taxes, factory building $ 20,000 Sales commissions $65,000 Insurance, factory $ 6,000 Depreciation, administrativeoffice equipment $ 3,000 Lease cost, factory equipment $ 19,000Indirect materials, factory $ 20,000 Depreciation, factory building$ 102,000 Administrative office supplies (billing) $ 4,000Administrative office salaries $ 112,000 Direct materials used(wood, bolts, etc.) $ 434,000 Utilities, factory $ 47,000 Required:1. Enter the dollar amount of each cost item under the appropriateheadings. Note that each cost item is classified in two ways:first, as variable or fixed with respect to the number of unitsproduced and sold; and second, as a selling and administrative costor a product cost. (If the item is a product cost, it should alsobe classified as either direct or indirect.) 2. Compute the averageproduct cost of one patio set. 3. Assume that production drops toonly 1,000 sets annually. Would you expect the average product costper set to increase, decrease, or remain unchanged?
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