Reference no: EM132470623
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 1,130 bicycles were manufactured, shipped, and sold. There was no beginning or ending work in process or finished goods inventory in November:
Item October November
Units produced and sold 1,030 1,130
Sales $1,030,000 $1,130,000
Leather used for the bicycle seats 33,990 37,290
Production manager's salary 6,650 6,650
Life insurance for the company president 265 265
Electricity used in the production facilities 4,285 4,685
Sales commissions 46,300 51,560
Internet advertising 1,200 1,200
Employee benefits for the production workers 24,720 27,120
Property taxes on the production facilities 1,650 1,650
Shipping costs 46,300 51,560
Salary of the chief financial officer 11,300 11,300
- Each month, regardless of how much electricity is used, Cycle Business pays a $165 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 6 hours of direct labour.
Question 1: Assume that 1,330 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.