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Head Question 2. (30 marks) Squamish Co. makes three product-road bikes, mountain bikes and hybrid bikes. The road bikes are a low volume product that is more specialized while the mountain bikes and hybrid bikes are of higher volume and easier to manufacture. Squamish Co. allocated manufacturing overhead costs to the three products for the month of May. Squamish Co. has an estimated overhead cost of $5,000,000 and uses 500,000 machine hours for the year. Squamish Co. has decided to allocated overheads on the basis of machine hours. At the end of June, Squamish Co. used 7,000 machine hours for manufacturing road bikes, 15,000 machine hours for manufacturing mountain bikes and 13,000 hours for manufacturing hybrid bikes. Squamish Co. estimates the following activities to be of importance and notes the estimated number of units: Activity Base Amount Total Costs Purchase Materials 450,000 pieces 2,500,000 Machine Setups 70,000 set ups 1,000,000 Inspections 7,000 inspection 700,000 hours Running Machines 40,000 hours 800,000 Total Overhead 5,000,000 Total Overhead 5,000,000 Road Bike Mountain Bike Hybrid Bike 40 40 120 60 50 158 30 70 8 70 190 5,200 100 4,800 300 4,500 200 800 8 4 10 Information Opening Inventory Produced Inventory Ending Inventory Sold Inventory Sales Price Direct Materials pert bike Direct Labour hours Direct Labour costs Purchase Materials (pieces) Machine Setups (set ups) Inspections (hours) Running Machines (hours) 20 3,000 15 2,000 15 1,000 2,500 3,000 5,000 3,000 5,000 4,000 4,000 1,000 3,000 Part A: Given the following information prepare a schedule that calculates the full cost of the road bike using activity base costing. Header

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