Rider Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing
Question:
Rider Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Rider produces and sells only 5,000 bikes each year. Due to the low volume of activity, Rider is unable to obtain the economies of scale that larger producers achieve. For example, Rider could buy the handlebars for \($30\) each; they cost \($34\) each to make. The following is a detailed breakdown of current production costs.
After seeing these figures, Rider’s president remarked that it would be foolish for the company to continue to produce the handlebars at \($34\) each when it can buy them for \($30\) each.
Required:
Do you agree with the president’s conclusion? Support your answer with appropriate computations.
Step by Step Answer:
Survey Of Accounting
ISBN: 9780073526775
1st Edition
Authors: Thomas Edmonds, Philip Olds, Frances McNair, Bor-Yi Tsay