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PLEASE SOLVE Question 2 only: Cycle Business manufactures and sells road and mountain bikes through a network of retail outlets in western Canada. Below is
PLEASE SOLVE Question 2 only:
Cycle Business manufactures and sells road and mountain bikes through a network of retail outlets in western Canada. Below is a partial list of expense items incurred in the most recent month (November), when 1,090 bicycles were manufactured, shipped, and sold. There was no beginning or ending work in process or finished goods inventory in November Item Units produced and sold Sales October 990 November 1,090 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 $ 990,000 $1,090,000 26,730 29,430 6,450 6,450 245 245 5,095 5,595 45,900 51,080 1,100 1,100 31,680 34, 880 1,450 1,450 45,900 51,080 10,900 10,900 * Each month, regardless of how much electricity is used, Cycle Business pays a $145 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 8 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. Behaviour Variable Fixed Direct/indirect Direct Indirect Variable/fixed 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 Type Manufacturing Manufacturing Administrative Manufacturing Selling Selling Manufacturing Manufacturing Selling Administrative Variable Fixed Indirect Indirect 2. Assume that 1,290 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
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