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 $7,000$ 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 $$34$ each; they cost $$37$ 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 $$37$ each when it can buy them for $$34$ each.

Required

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