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 1,180 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		1,080			1,180
Sales	$	1,080,000		$	1,180,000
Leather used for the bicycle seats		30,240			33,040
Production manager’s salary		6,900			6,900
Life insurance for the company president		290			290
Electricity used in the production facilities*		4,510			4,910
Sales commissions		46,800			52,160
Internet advertising		1,300			1,300
Employee benefits for the production workers↑		21,600			23,600
Property taxes on the production facilities		1,900			1,900
Shipping costs		46,800			52,160
Salary of the chief financial officer		11,800			11,800
*Each month, regardless of how much electricity is used, Cycle Business pays a $190 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 5 hours of direct labour.

2. Assume that 1,380 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.

Answer 1

Answer along with working note give below