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 450,000 pieces 2,500,000 Materials Machine Setups 70.000 set ups 1,000,000 Inspections 7,000 inspection 700,000 hours Running 40,000 hours Machines Total Overhead 800,000 5.000.000 Mountain Bike 120 50 Hybrid Bike 40 158 70 100 4.800 300 8 190 4,500 200 8 4 Information Road Bike Opening Inventory 40 Produced 60 Inventory Ending Inventory 30 Sold Inventory 70 Sales Price 5200 Direct Materials per 800 bike Direct Labour 10 hours Direct Labour 20 costs Purchase Materials 3.000 (pieces) Machine Setups 5.000 (set ups) Inspections (hours) 3.000 Running Machines 5.000 (hours) 15 15 2.000 1.000 2.500 3,000 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