Question

Question 2

Giant Bike Sdn Bhd (GBSB) produces many different models of bicycles. Assume that the market has responded enthusisistically to a new model, the Jaguar. As a result, the company has established a separate manufacturing facility to produce these bicycles. The company produces 1,000 bicycles per month. Giant’s monthly manufacturing costs and other data are as follows:

1. Rent on manufacturing equipment RM2,000 per month
2. Insurance on manufacturing building RM750 per month
3. Raw materials (frame, tires etc) RM80 per bicycle
4. Utility costs for manufacturing facility RM1,000 per month
5. Supplies for administrative office RM800 per month
6. Wages for assembly line workers in manufacturing facility RM30 per bicycle
7. Depreciation on office equipment RM650 per month
8. Miscellaneous manufacturing materials (lubricants, solders etc) RM1.20 per bicycle
9. Property taxes on manufacturing building RM2,400 per year
10. Manufacturing supervisor’s salary RM3,000 per month
11. Advertising for bicycles RM30,000 per year
12. Sales commissions RM10 per bicycle
13. Depreciation on manufacturing building RM1,500 per month

Required:
a) Classify the manufacturing costs above (item 1 to 13) as Production cost (direct materials / direct labour / other manufacturing overhead) or Period cost.                           (6.5 marks)

b) Complete total manufacturing costs for the month.                                           (8.5 marks)
(Total: 15 Marks)

Answer 1

1. Production Cost

Direct Material

Raw Material (80 per bicycle )                                                               80,000

Direct Labour

Wages – Assembly line workers (30 per Bicycle)                                  30,000

Other Manufacturing Overhead

Utility cost                                                                                                              1,000

Misc. manufacturing materials                                                                              1,200

Total Production Cost                                                                                             1,12,200

1. Total Manufacturing Cost

Total Production Cost + other indirect overheads

Other Indirect Overheads

Rent                                                                                                                        2000

Insurance                                                                                                750

Supplies Office                                                                                                       800

Depreciation (office eqp)                                                                       650

Property Tax                                                                                                            200

Supervisor Salary                                                                                    3000

Advertisement                                                                                                        2500

Sales commission                                                                                   10000

Depreciation on Building                                                                        1500                                                                                                       

Other Indirect Overheads                                                                       21,400

Total Manufactuing Cost = 1,12,200 + 21400                      
                                                    = 1,33,600