Adams Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-qualityracing bikes with limited sales. Adams produces and sells only 6,200 bikes each year. Due to the low volume of activity, Adams isunable to obtain the economies of scale that larger producers achieve. For example, Adams could buy the handlebars for $30 each;they cost $33 each to make. The following is a detailed breakdown of current production costs.ItemUnit-level costsMaterialsLaborOverheadAllocated facility-level costsTotalUnit Cost$15927$33Total$ 93,00055,80012,40043,400$204,600After seeing these figures, Adams's president remarked that it would be foolish for the company to continue to produce thehandlebars at $33 each when it can buy them for $30 each.RequiredCalculate the total relevant cost. Do you agree with the president's conclusion?Answer is complete but not entirely correct.Per UnitTotal< Prev4 of 5Return to question-+++Next >

Relevant cost means the cost that will be incurred if a particular activity is undertaken. It…

Answered: Adams Bicycle Manufacturing Company…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Steele Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racingbikes with limited sales. Steele produces and sells only 10,000 bikes each year. Due to the low volume of activity, Steele is unable to obtainthe economies of scale that larger producers achieve. For example, Steele could buy the handlebars for $31 each; they cost $34 each tomake. The following is a detailed breakdown of current production costs. Item Unit Cost Total Unit Level Costs Materials $16 160,000 Labor 12 120,000 Overhead 2 20,000 Allocated Facility Level Cost 4 40,000 Total $34 340,000 After seeing these figures, Steele’s president remarked that it would be foolish for the company to continue to produce the handlebars at $34each when it can buy them for $31 each.RequiredCalculate the total relevant cost. Do you agree with the president’s conclusion? Per Unit Total Total Relevant Cost
Munoz Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Munoz produces and sells only 7,900 bikes each year. Due to the low volume of activity, Munoz is unable to obtain the economies of scale that larger producers achieve. For example, Munoz 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 Cost Total Unit-level costs Materials $ 14 $ 110,600 Labor 9 71,100 Overhead 2 15,800 Allocated facility-level costs 15 118,500 Total $ 40 $ 316,000 After seeing these figures, Munoz’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…
Campbell Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high- quality racing bikes with limited sales. Campbell produces and sells only 7,700 bikes each year. Due to the low volume of activity, Campbell is unable to obtain the economies of scale that larger producers achieve. For example, Campbell could buy the handlebars for $33 each; they cost $36 each to make. The following is a detailed breakdown of current production costs. Item Unit Cost Total Unit-level costs $13 $100, 100 92,400 23,100 61,600 Materials Labor 12 Overhead Allocated facility-level costs 8 Total $36 $277,200 After seeing these figures, Campbell's president remarked that it would be foolish for the company to continue to produce the handlebars at $36 each when it can buy them for $33 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…
Jordan Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Jordan produces and sells only 6,200 bikes each year. Due to the low volume of activity, Jordan is unable to obtain the economies of scale that larger producers achieve. For example, Jordan could buy the handlebars for $37 each; they cost $40 each to make. The following is a detailed breakdown of current production costs. Unit Total Item Cost Unit-level costs Materials $17 $105,400 55,800 12,400 Labor Overhead 2 Allocated facility-level 74,400 12 costs $40 $248,000 Total After seeing these figures, Jordan'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: a. Calculate the total relevant cost. Total Per Unit Total relevant cost b. Do you agree with the president's conclusion? Yes No O O
Jordan Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Jordan produces and sells only 6,700 bikes each year. Due to the low volume of activity, Jordan is unable to obtain the economies of scale that larger producers achieve. For example, Jordan could buy the handlebars for $40 each; they cost $43 each to make. The following is a detailed breakdown of current production costs. Unit Total Item Cost Unit-level costs $ 113,900 60,300 13,400 $17 Materials Labor 9 Overhead 2 Allocated facility-level 15 100,500 Costs Total $43 $288,100 After seeing these figures, Jordan's president remarked that it would be foolish for the company to continue to produce the handlebars at $43 each when it can buy them for $40 each Required: a. Calculate the total relevant cost Per Unit Total Total relevant cost b.Do you agree with the president's conclusion? Yes O No
Jordan Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high- quality racing bikes with limited sales. Jordan produces and sells only 7,400 bikes each year. Due to the low volume of activity, Jordan is unable to obtain the economies of scale that larger producers achieve. For example, Jordan could buy the handlebars for $33 each; they cost $36 each to make. The following is a detailed breakdown of current production costs. Item Unit-level costs Materials Labor Overhead Allocated facility-level costs Total Unit Cost $17 8 2 9 $36 Per Unit Total relevant cost Do you agree with the president's conclusion? After seeing these figures, Jordan's president remarked that it would be foolish for the company to continue to produce the handlebars at $36 each when it can buy them for $33 each. Total $125,800 59,200 14,800 66,600 $266,400 Required Calculate the total relevant cost. Do you agree with the president's conclusion? Total
The EKTA Company, founded in 1992, is a manufacturer and exporter ofhigh-end bicycles. Its assembly division buys bicycle frames from the framedivision and assembles the bicycles.The frame division, which is operating at capacity, incurs an incrementalmanufacturing cost of $65 per frame. The frame division can sell all its output to the outside market at a price of $100 per frame, after incurring a variable marketing and distribution cost of $8 per frame. If the assembly division purchases frames from outside suppliers at a price of $100 per frame, it will incur a variable purchasing cost of $7 per frame. EKTA’s division managers can act autonomously to maximize their own division’s operating income. The EKTA’s main competitor does not manufacture their bicycleframes. They purchase the frames from outside suppliers for theirAssembly Division. Do you believe that this difference in operationsgives either EKTA or their competitor a pricing advantage over theother?
Jordan Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Jordan produces and sells only 6,200 bikes each year. Due to the low volume of activity, Jordan is unable to obtain the economies of scale that larger producers achieve. For example, Jordan could buy the handlebars for $32 each; they cost $35 each to make. The following is a detailed breakdown of current production costs Unit Cost Total Item Unit-level costs 16 99,200 62,000 18,600 Materials Labor 10 Overhead 3 Allocated facility-level 6 37,200 Costs $35 $217,000 Total After seeing these figures, Jordan's president remarked that it would be foolish for the company to continue to produce the handlebars at $35 each when it can buy them for $32 each Required: a. Calculate the total relevant cost. Per Unit Total Total relevant cost b. Do you agree with the president's conclusion? Yes ONo оо
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