This exercise asks you to apply Standard Costing to Colorado Ricardo Mountain Bikes.
The Scenario: Colorado Ricardo Mountain Bikes
Colorado Ricardo Mountain Bikes was founded by Ricardo Francisco, a keen off-road cyclist who grew frustrated with bikes breaking down under the strain of the Colorado mountains. After years of trial and error, he built a bike tough enough to survive the terrain and named it the “Colorado Ricardo”. Word spread quickly among local riders, and Ricardo gave up his day job to build and sell bikes full-time from a small workshop outside Denver.
Colorado Ricardo’s standard cost per bike is $300 for materials, $250 for direct labour and $150 for overhead, totalling $700. This year, a rise in steel prices pushed actual material cost to $320 per bike, while improved efficiency on the workshop floor brought actual labour cost down to $240 per bike. Actual overhead cost stayed on budget at $150.
Once you have drafted your own answer, compare it with Marketing Teacher’s suggested answer.
