Return to question Problem 2-13 Cost Classification [L02. L05, L06] 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 1,150 bicycles were manufactured, shipped. and sold. There was no beginning or ending work in process or nished goods inventory in November: Item October November Units produced and sold 1,050 1,150 5'11\" $1,050,000 $1,150,000 Leather used for the bicycle seats 36,750 40,250 Production manager's salary 6,?50 6,?50 Life insurance for the company president 275 2?5 Electricity used in the production facilities* 1,225 1,325 Sales commissions 46,500 51,800 Internet advertising 1,300 1,300 Employee benefits for the production workersl 33,500 36,000 Property taxes on the production facilities 1,?50 1,750 Shipping costs 46,500 51,000 Salary of the chief financial officer 11,500 11,500 *Each month, regardless of how much electricity is used, Cycle Business pays a $1?5 base charge to the utilities company. TEmployee benefits total 20% of the wages paid to production workers, who on average earn $20 per hour. Bach 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. Answer is complete and correct. Item Type Behaviour Direct/Indirect Leather used for the bicycle seats Manufacturing @ Variable Direct Production manager's salary Manufacturing Fixed Indirect Life insurance for the company president Administrative Electricity used in the production facilities Manufacturing Variable/fixed @ Indirect Sales commissions Selling Internet advertising Selling Employee benefits for the production workers Manufacturing Variable V Indirect Property taxes on the production facilities Manufacturing Fixed V Indirect Shipping costs Selling Salary of the chief financial officer Administrative V2. Assume that 1.350 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 benets will continue at 2096 of wages. 9 Answer Is complete but not entirely correct. $215350 9
