Final assembly: Parts Labor Total final assembly Overhead costs: Rent Office staff Depreciation Other costs Total overhead Total annual costs Frame assembly: Steel tubing Paint Labor Total frame Wheel assembly: Parts Rework parts Labor Total wheel Final assembly: Parts Rework parts Labor Total final assembly Overhead costs: Rent Office staff Depreciation Other costs Total overhead Total annual costs $3,500,000 (10,000 kits @$350.00/kit) 105,000 (7,500 hrs. @$14.00/hr.) $3,605,000 $250,000 100,000 100,000 750,000 (estimated to be 2/3 variable) $1,200,000 $10,895,000 Exhibit 2: 2004 Production Costs Actual production: 10,800 bicycles $3,572,100 (113,400 lbs. @ $31.50/lb.) 28,187 (1,375 gals. @ $20.50/gal.) $1,528,050 (100,200 hrs. @ $15.25/hr.) $5,128,337 $1,317,600 25,000 74,250 $1,416,850 $3,963,600 (10,800 kits @@ $367.00/kit) 45,000 (miscellaneous parts) 116,000 (8,000 hrs. @ $14.50/hr.) $4,124,600 $250,000 100,000 100,000 850,000 (10,800 kits @ $122.00/kit) (spokes and rims) 5500 hrs @ 13.5/hr. $1,300,000 $11,969,787

\begin{tabular}{|l|r|l|} \hline Parts & $3,500,000 & (10,000 kits @\$350.00/kit) \\ \hline Labor & 105,000 & (7,500 hrs. @\$14.00/hr.) \\ \hline Total final assembly & $3,605,000 & \\ \hline Overhead costs: & & \\ \hline Rent & $250,000 & \\ \hline Office staff & 100,000 & \\ \hline Depreciation & 100,000 & \\ \hline \end{tabular} \begin{tabular}{|l|r|l|} \hline Parts & $3,500,000 & (10,000 kits @\$350.00/kit) \\ \hline Labor & 105,000 & (7,500 hrs. @\$14.00/hr.) \\ \hline Total final assembly & $3,605,000 & \\ \hline Overhead costs: & & \\ \hline Rent & $250,000 & \\ \hline Office staff & 100,000 & \\ \hline Depreciation & 100,000 & \\ \hline \end{tabular}