Exercise $6-10$A $($Algo$)$ Outsourcing decision LO $6-3$

Walton Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high$-$quality

racing bikes with limited sales. Walton produces and sells only $7,600$ bikes each year. Due to the low volume of activity, Walton is

unable to obtain the economies of scale that larger producers achieve. For example, Walton could buy the handlebars for $$36$ each;

they cost $$39$ each to make. The following is a detailed breakdown of current production costs.

After seeing these figures, Walton's president remarked that it would be foolish for the company to continue to produce the

handlebars at $$39$ each when it can buy them for $$36$ each.

Required

Calculate the total relevant cost. Do you agree with the president's conclusion?