Question

Problem 2-53 Fixed and Variable Costs; Forecasting (LO 2-7, 2-8) Toledo Toy Company incurred the following costs during 20x4. The company sold all of its products manufactured during the year. Direct material Direct labor Manufacturing overhead 5,000,000 2,300,000 Utilities (primarily electricity) Depreciation on plant and equipment Insurance Supervisory salaries Property taxes 140,000 230,000 180,000 300,000 230,000 Selling costs Advertising Sales commissions 185,000 90,000 Administrative costs: Salaries of top management and staff Office supplies Depreciation on building and 373,000 50,000 80,000 equipment During 20x4, the company operated at about half of its capacity, due to a slowdown in the economy. Prospects for 20x5 are slightly better. Jared Lowes, the marketing

Answer 1

Particulars			Variable or fixed	20x5 Forecast	Working
Direct Material			Variable	600000	500000*1.20
Direct labour			Variable	2760000	2300000*1.20
Manufacturing Overhead
Utilities (primarily electricity)			Variable	168000	140000*1.20
Depreciation on plant & equip			Fixed	230000
Insurance			Fixed	180000
Supervisory salary			Fixed	300000
property taxes			Fixed	230000
Selling Costs
advertising			Fixed	185000
sales commissions			Variable	108000	90000*1.20
Administrative costs
Salaries of top management & staff			Fixed	373000
Office supplies			Fixed	50000
Depreciation on building and equipment			Fixed	80000
Variable cost related to the production process therefore variable cost will be change as per
production level
Fixed cost will remain Fixed