Question

The following events took place for Rushmore Biking Inc. during February, the first month of operations as a producer of road bikes:

1. Purchased $480,000 of materials.
2. Used $434,500 of direct materials in production.
3. Incurred $125,000 of direct labor wages.
4. Applied factory overhead at a rate of 40% of direct labor cost.
5. Transferred $578,000 of work in process to finished goods.
6. Sold goods with a cost of $550,000.
7. Revenues earned by selling bikes, $910,000.
8. Incurred $185,000 of selling expenses.
9. Incurred $90,000 of administrative expenses.

Answer 1

The total cost of producing a home exercise cycle is $609,500 when considering materials, direct labor, and factory overhead.

Step-by-step explanation:

To calculate the total cost of producing a home exercise cycle, we need to consider the cost of materials, direct labor wages, and factory overhead. Here is the step-by-step calculation:

1. Purchased $480,000 of materials.
2. Used $434,500 of direct materials in production.
3. Incurred $125,000 of direct labor wages.
4. Applied factory overhead at a rate of 40% of direct labor cost: 40% * $125,000 = $50,000.
5. The total cost of production is the sum of materials used, direct labor wages, and factory overhead: $434,500 + $125,000 + $50,000 = $609,500.