Cincinnati Cycle Company produces two subassemblies, JY-63 and RX-67, used in manufacturing motorcycles. The company is currently using an absorption costing system that applies overhead based on direct-labor hours. The budget for the current year ending December 31, 20x4 is as follows:

CINCINNATI CYCLE COMPANY Budgeted statement of gross margin for 20x4
	JY-63			RX-67			Total
Sales in units		5,000			5,000			10,000
Sales revenue	$	3,400,000		$	4,400,000		$	7,800,000
Cost of goods manufactured and sold:
Beginning finished-goods inventory	$	480,000		$	600,000		$	1,080,000
Add: Direct material		2,000,000			3,500,000			5,500,000
Direct labor		370,370			185,186			555,556
Applied manufacturing overhead*		1,088,050			544,026			1,632,076
Cost of goods available for sale	$	3,939,420		$	4,829,212		$	8,767,632
Less: Ending finished-goods inventory		480,000			600,000			1,080,000
Cost of goods sold	$	3,458,420		$	4,229,212		$	7,687,632
Gross margin	$	(58,420	)	$	170,788		$	112,368

*Applied on the basis of direct-labor hours:

Machining	$	849,056
Assembly		433,962
Material handling		113,208
Inspection		235,850
Total	$	1,632,076

Jay Rexford, Cincinnati Cycles president, has been reading about a new type of costing method called activity-based costing. Rexford is convinced that activity-based costing will cast a new light on future profits. As a result, Jack Canfield, the companys director of cost management, has accumulated cost pool information for this year shown on the following chart. This information is based on a product mix of 5,000 units of JY-63 and 5,000 units of RX-67.

Cost Pool Information for 20x4
Cost Pool	Activity	JY-63		RX-67
Direct labor	Direct-labor hours (per product line)	10,000		5,000
Material handling	Number of parts (per unit)	5		10
Inspection	Inspection hours (per product line)	5,000		7,500
Machining	Machine hours (per product line)	15,000		30,000
Assembly	Assembly hours (per product line)	6,000		5,500

In addition, the following information is projected for the next calendar year, 20x5.

	JY-63		RX-67
Sales (in units)	5,100		4,900
Beginning inventory, finished goods (in units)	800		600
Ending inventory, finished goods (in units)	700		700

On January 1, 20x5, Rexford is planning to increase the prices of JY-63 to $710 and RX-67 to $910. Material costs are not expected to increase in 20x5, but direct labor will increase by 8 percent, and all manufacturing overhead costs will increase by 6 percent. Due to the nature of the manufacturing process, the company does not have any beginning or ending work-in-process inventories.

Cincinnati Cycle Company uses a just-in-time inventory system and has materials delivered to the production facility directly from the vendors. The raw-material inventory both at the beginning and the end of the month is immaterial and can be ignored for the purposes of a budgeted income statement. The company uses the first-in, first-out (FIFO) inventory method.

Required:

2.

Using activity-based costing, calculate the total cost for 20x5 for the following activity cost pools: material handling, inspection, machining, and assembly. Then, calculate the pool rate per unit of the appropriate cost driver for each of the four activities. (Round your total cost answers to the nearest whole dollar. Round pool rates to 2 decimal places.)

Material handling (Total Cost for activity costs Pools?) (Per Part?) Inspection (Total cost for activity costs pools ?) (Per inspection hour ?) Machining (Total cost for activity costs pools ?) (Per machine hour ?) Assembly (Total cost for activity costs pools ?) (Per assembly hour ?)

4.	Prepare a budgeted statement showing the gross margin for Cincinnati Cycle Company for 20x5, using activity-based costing. (Round your answers to the nearest dollar amount.)
	Cinncinnati Cycle Company Budgeted Statement of of Gross Margin for 20X5 Sales revenue JY63? RX67 Total Cost of Goods Sole JY63? RX67? Total? Beginning Finished goods inventory JY63? RX67? Total? ? ? ? ? ? ? Cost of goods available for sale JY63? RX67? Total? ? Cost of goods sold JY63? RX67? Total? Gross Margin/Loss JY63? RX67? Total?