Question

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.

Answer 1

COMPUTATION OF TOTAL MANUFACTURING COST
Particulars		Amount (1290 units)
Leather used for the bicycle seats		$                   1,290,000
Production manager's salary		$                           6,450
Electricity used in the production facilities (note 1)		$                           5,845
Employees benefits for the production workers		$                         41,280
Property tax on the production facilities		$                           1,450
	TOTAL MANUFACTURING COST	$ 1,345,025

Note :

1)Calculation of electricity = for 200 units increase of bicycles $ 500 is increased in amount so (990 to 1290 ) $ 250 is more added to 5,595 to get 5845.

2)Employees benefits for the production facilities

Total hours =10,320 (1290*8)

Rate per hour =$ 20

so cost =(10320*20)*20% =41,280