Ivanhoe Bikes could sell its bicycles to retailers either assembled or unassembled. The cost of an unassembled bike is as follows. Direct materials $ 162 Direct labor 70 Variable overhead (70% of direct labor) 49 Fixed overhead (30% of direct labor) 21 Manufacturing cost per unit $ 302 The unassembled bikes are sold to retailers at $ 476 each. Ivanhoe has unused productive capacity that is expected to continue indefinitely; management has concluded that some of this capacity could be used to assemble the bikes and sell them at $ 521 each. Assembling the bikes will increase direct materials by $ 5 per bike and direct labor by $ 10 per bike. Additional variable overhead will be incurred at the normal rates, but there will be no additional fixed overhead as a result of assembling the bikes. Prepare an incremental analysis for the sell-or-process-further decision. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Do not leave any field blank. Enter O for the amounts.) Net Income Process Increase Sell Further (Decrease) 2$ Should Ivanhoe sell or process further? Ivanhoe Bikes should
Ivanhoe Bikes could sell its bicycles to retailers either assembled or unassembled. The cost of an unassembled bike is as follows. Direct materials $ 162 Direct labor 70 Variable overhead (70% of direct labor) 49 Fixed overhead (30% of direct labor) 21 Manufacturing cost per unit $ 302 The unassembled bikes are sold to retailers at $ 476 each. Ivanhoe has unused productive capacity that is expected to continue indefinitely; management has concluded that some of this capacity could be used to assemble the bikes and sell them at $ 521 each. Assembling the bikes will increase direct materials by $ 5 per bike and direct labor by $ 10 per bike. Additional variable overhead will be incurred at the normal rates, but there will be no additional fixed overhead as a result of assembling the bikes. Prepare an incremental analysis for the sell-or-process-further decision. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Do not leave any field blank. Enter O for the amounts.) Net Income Process Increase Sell Further (Decrease) 2$ Should Ivanhoe sell or process further? Ivanhoe Bikes should
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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