PROBLEM: Front Range Furniture expects to maintain the sameinventories at the end of 2020 as at the beginning of the year. Thetotal of all production costs for the year is assumed to be equalto the cost of goods sold. With this in mind, the variousdepartment heads were asked to submit estimates of the costs oftheir departments during the year. A summary report of theseestimates is as follows:
Estimated variablecost Estimated Fixed cost
Productioncosts:
Direct material 50
Directlabor 30
Factoryoverhead 350,000
Selling Expense:
Sales salaries/ commission 4 340,000
Travel 4,000
Advertising 116,000
Miscellaneous Sellingexpenses 1 2,300
Administrative Expenses:
Management and office staffsalaries 325,000
Officesupplies 4 6,000
Misc. Administrativeexpenses 1 8,700
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$90 $1,152,000
It’s expected that 12,000 units will be sold at a price of $240per unit. Maximum sales within the relevant range are 18,000.
Required: Complete the chart in your working papers to calculatetotal fixed and variable costs (see the Working Papers for moredetailed instructions).
