Steele Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Steele produces and sells only 10,000 bikes each year. Due to the low volume of activity, Steele is unable to obtain the economies of scale that larger producers achieve. For example, Steele could buy the handlebars for $31 each; they cost $34 each to make.
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 costs 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 $34 each when it can buy them for $31 each.
Calculate the total relevant cost. Do you agree with the president's conclusion?
Answers (1)
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Steele Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
Kimberly Ortiz strongly believes in working for a company that promotes diversity. She believes that such organizations are respectful of differences and allow employees more exposure.
Answers (1)
In the case files section, four people pay a different price for the same digital music player. Why do the prices they paid differ? Explain the factors that affected each person's ultimate cost for the music player.
Answers (1)
An apartment building has 10 units, each of which rents for $550 per month. The vacancy rate is projected to be 4% and operating expenses are projected to be 38% of effective gross income. Estimate the property value using a "cap rate" of 11%.
Answers (1)
John smith and susan jones own a business together. it was agreed that susan would work 45 hours per week and spend 15 hours working with customers and the remaining time supervising the employees.
Answers (1)
James Smith has worked for Perfect Transmission Installers for eight years. His annual base salary is $52,000. For overtime hours, which he has averaged as six hours per week, he receives double pay based on his per hour wage of $25.
Answers (1)
New Questions in Business
Explain briefly why professional certification and membership in professional organizations are important.
Answers (1)
Suppose that Omar's marginal utility for each additional cup of coffee is 5.5 utils per cup no matter how many cups he drinks.
Answers (1)
A worker gets a raise of $120 per month and quickly decides to spend $90 of the money on necessities and the occasional luxury, while putting the remaining $30 into retirement savings.
Answers (1)
Is mobile suit gundam the origin a retelling?
Answers (1)
Waterway Industries can produce 100 units of a component part with the following costs: Direct Materials $15800 Direct Labor 6900 Variable Overhead 16800 Fixed Overhead 12000 If Waterway Industries can purchase the component part externally for
Answers (1)