question archive Benson Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales
Benson Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales
Subject:AccountingPrice: Bought3
Benson Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Benson produces and sells only 6,900 bikes each year. Due to the low volume of activity, Benson is unable to obtain the economies of scale that larger producers achieve. For example, Benson could buy the handlebars for $38 each; they cost $41 each to make. The following is a detailed breakdown of current production costs. Unit Cost Total Item Unit-level costs Materials Labor Overhead Allocated facility- level costs Total $16 10 2 $110,400 69,000 13,800 89,700 $282,900 13 $41 After seeing these figures, Benson's president remarked that it would be foolish for the company to continue to produce the handlebars at $41 each when it can buy them for $38 each. Required Calculate the total relevant cost. Do you agree with the president's conclusion? Total Per Unit Total relevant cost Do you agree with the president's conclusion?
