Question

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 1,170 bicycles were manufactured, shipped, and sold. There was no beginning or ending work in process or finished goods inventory in November: October 1,070 November 1,170 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 $1,070,000 31,030 6,850 285 3,395 46,700 1,300 $1,170,000 33,930 6,850 285 3,695 52,040 1,300 42,800 1,850 46,700 11,700 46,800 1,850 52,040 11,700 *Each month, regardless of how much electricity is used, Cycle Business pays a $185 base charge to the utilities company. 1 Employee benefits total 20% of the wages paid to production workers, who on average earn $20 per hour. Each bicycle requires 10 hours of direct labour.

Answer 1

	Type	Behavior	Direct/Indirect
Leather	Manufacturing	Variable	Direct
Prod manager salary	Manufacturing	Fixed	Indirect
Life Insurance	Admin
Electricity	Manufacturing	Variable/Fixed	Indirect
Sales	Selling
Internet Ad	Selling
Employee benefit	Manufacturing	Variable	Indirect
Property tax	Manufacturing	Fixed	Indirect
Shipping cost	Selling
Salary if Fin controller	Admin

Cost of 1360 bicycles is as follows :
Leather used for the bicycle seats = 1370*29	$39,730
(31030/1070) or (33930/1170)
Production managers salary	$6,850
Electricity used in the production facilities = 185 + (1370*3)
(3395-185)/1070 or (3695-185)/1170	$4,295
Employee benefit for production workers = 1370*20*10*20%	$54,800
Property tax on production facilities	$1,850
	$107,525

So, the total cost is $107,525