Cycle Business manufactures and sells road and mountain bikes through a network of retail outlets in stern Canada. Below is a partial list of expense items incurred in the most recent month (November), when 1,190 bicycles were manufactured, shipped, and sold. There was no beginning or ending work in process or finished goods inventory in November: October 1,090 November 1,190 Item Units produced and sold Sales Leather used for the bicycle seats Production manager's salary Life insurance for the company president Electricity used in the production facilities* Sales commissions Internet advertising Employee benefits for the production workerst Property taxes on the production facilities Shipping costs Salary of the chief financial officer $1,090,000 32,700 6,950 295 5,645 46,900 1,300 26,160 1,950 46,900 11,900 $1,190,000 35,700 6,950 295 6,145 52,280 1,300 28,560 1,950 52,280 11,900 "Each month, regardless of how much electricity is used, Cycle Business pays a $195 base charge to the utilities company. Employee benefits total 20% of the wages paid to production workers, who on average earn $20 per hour. Each bicycle requires 6 hours of direct labour. Required: 1. With respect to the partial list of November expenses: a. Use the Type column to label each item as a Manufacturing, Administrative, or Selling cost. b. For those items you labeled as a Manufacturing cost, i. Use the Behaviour column to label each item as variable or fixed manufacturing costs. ii. Use the Direct/Indirect column to label each item as a direct or indirect cost. Type Behaviour Direct/Indirect Item Leather used for the bicycle seats Production manager's salary Life insurance for the company president Electricity used in the production facilities Sales commissions Internet advertising Employee benefits for the production workers Property taxes on the production facilities Shipping costs Salary of the chief financial officer 2. Assume that 1,390 bicycles will be manufactured and sold in December. For the items you classified as manufacturing costs in requirement 1, estimate the cost for December. Assume that there will be no change in unit costs for any direct materials, hourly wages will remain the same, and employee benefits will continue at 20% of wages. Cost Cycle Business manufactures and sells road and mountain bikes through a network of retail outlets in stern Canada. Below is a partial list of expense items incurred in the most recent month (November), when 1,190 bicycles were manufactured, shipped, and sold. There was no beginning or ending work in process or finished goods inventory in November: October 1,090 November 1,190 Item Units produced and sold Sales Leather used for the bicycle seats Production manager's salary Life insurance for the company president Electricity used in the production facilities* Sales commissions Internet advertising Employee benefits for the production workerst Property taxes on the production facilities Shipping costs Salary of the chief financial officer $1,090,000 32,700 6,950 295 5,645 46,900 1,300 26,160 1,950 46,900 11,900 $1,190,000 35,700 6,950 295 6,145 52,280 1,300 28,560 1,950 52,280 11,900 "Each month, regardless of how much electricity is used, Cycle Business pays a $195 base charge to the utilities company. Employee benefits total 20% of the wages paid to production workers, who on average earn $20 per hour. Each bicycle requires 6 hours of direct labour. Required: 1. With respect to the partial list of November expenses: a. Use the Type column to label each item as a Manufacturing, Administrative, or Selling cost. b. For those items you labeled as a Manufacturing cost, i. Use the Behaviour column to label each item as variable or fixed manufacturing costs. ii. Use the Direct/Indirect column to label each item as a direct or indirect cost. Type Behaviour Direct/Indirect Item Leather used for the bicycle seats Production manager's salary Life insurance for the company president Electricity used in the production facilities Sales commissions Internet advertising Employee benefits for the production workers Property taxes on the production facilities Shipping costs Salary of the chief financial officer 2. Assume that 1,390 bicycles will be manufactured and sold in December. For the items you classified as manufacturing costs in requirement 1, estimate the cost for December. Assume that there will be no change in unit costs for any direct materials, hourly wages will remain the same, and employee benefits will continue at 20% of wages. Cost
