The electric bicycle manufacturer Kervel keeps its accounts by nature. For the quarter, its production cost accounts show 450,000 of materials and direct labour, 90,000 of variable overheads and 360,000 of fixed overheads (depreciation of the lines, factory supervision). A battery shortage reduced production, to a level considered abnormally low, to 24,000 units bicycles, whereas the quarterly normal capacity, based on the average of previous quarters, is 30,000 units bicycles. No bicycle has been sold yet. Record the quarter-end entry transferring the production costs to inventories.
- Materials and direct labour
- 450,000
- Variable overheads
- 90,000
- Fixed overheads
- 360,000
- Quarterly normal capacity (bicycles)
- 30,000
- Actual production (bicycles)
- 24,000