Exercise 6-10A (Algo) Outsourcing decision LO 6-3 Walton Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Walton produces and sells only 7,600 bikes each year. Due to the low volume of activity, Walton is unable to obtain the economies of scale that larger producers achieve. For example, Walton could buy the handlebars for $36 each; they cost $39 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 Per Unit Unit Cost $16 9 3 11 $39 Total relevant cost Do you agree with the president's conclusion? After seeing these figures, Walton's president remarked that it would be foolish for the company to continue to produce the handlebars at $39 each when it can buy them for $36 each. Required Calculate the total relevant cost. Do you agree with the president's conclusion? Total Total $ 121,600 68,400 22,800 83,600 $ 296,400

Exercise 6-10A (Algo) Outsourcing decision LO 6-3 Walton Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Walton produces and sells only 7,600 bikes each year. Due to the low volume of activity, Walton is unable to obtain the economies of scale that larger producers achieve. For example, Walton could buy the handlebars for $36 each; they cost $39 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 Per Unit Unit Cost $16 9 3 11 $39 Total relevant cost Do you agree with the president's conclusion? After seeing these figures, Walton's president remarked that it would be foolish for the company to continue to produce the handlebars at $39 each when it can buy them for $36 each. Required Calculate the total relevant cost. Do you agree with the president's conclusion? Total Total $ 121,600 68,400 22,800 83,600 $ 296,400

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 19E

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