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

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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
Sll
Further
(Decrease)
$
$
Should Ivanhoe sell or process further?
Ivanhoe Bikes should
Transcribed Image Text: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 Sll Further (Decrease) $ $ Should Ivanhoe sell or process further? Ivanhoe Bikes should
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