Zachary Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality...
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Zachary Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Zachary produces and sells only 7,100 bikes each year. Due to the low volume of activity, Zachary is unable to obtain the economies of scale that larger producers achieve. For example, Zachary could buy the handlebars for $37 each; they cost $40 each to make. The following is a detailed breakdown of current production costs. Item Unit-level costs Materials Labor Overhead Allocated facility-level costs Unit Cost Total $17 10 $ 120,700 71,000 2 14,200 11 $ 40 78,100 $284,000 Total After seeing these figures, Zachary's president remarked that it would be foolish for the company to continue to produce the handlebars at $40 each when it can buy them for $37 each. Required Calculate the total relevant cost. Do you agree with the president's conclusion? Per Unit Total Total relevant cost Do you agree with the president's conclusion? Zachary Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Zachary produces and sells only 7,100 bikes each year. Due to the low volume of activity, Zachary is unable to obtain the economies of scale that larger producers achieve. For example, Zachary could buy the handlebars for $37 each; they cost $40 each to make. The following is a detailed breakdown of current production costs. Item Unit-level costs Materials Labor Overhead Allocated facility-level costs Unit Cost Total $17 10 $ 120,700 71,000 2 14,200 11 $ 40 78,100 $284,000 Total After seeing these figures, Zachary's president remarked that it would be foolish for the company to continue to produce the handlebars at $40 each when it can buy them for $37 each. Required Calculate the total relevant cost. Do you agree with the president's conclusion? Per Unit Total Total relevant cost Do you agree with the president's conclusion?
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