Jordan Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high- quality racing bikes with limited sales. Jordan produces and sells only 7,900 bikes each year. Due to the low volume of activity, Jordan is unable to obtain the economies of scale that larger producers achieve. For example, Jordan could buy the handlebars for $37 each; they cost $40 each to make. The following is a detailed breakdown of current production costs. Item Unit-level costs Materials Unit Cost Total Labor Overhead $17 $134,300 11 86,900 3 23,700 71,100 $40 $316,000 Allocated facility-level costs 9 Total After seeing these figures, Jordan's president remarked that it would be foolish for the company to continue to produce the handlebars at $40 each when it can buy them for $37 each. Calculate the total relevant cost per unit and total.
Jordan Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high- quality racing bikes with limited sales. Jordan produces and sells only 7,900 bikes each year. Due to the low volume of activity, Jordan is unable to obtain the economies of scale that larger producers achieve. For example, Jordan could buy the handlebars for $37 each; they cost $40 each to make. The following is a detailed breakdown of current production costs. Item Unit-level costs Materials Unit Cost Total Labor Overhead $17 $134,300 11 86,900 3 23,700 71,100 $40 $316,000 Allocated facility-level costs 9 Total After seeing these figures, Jordan's president remarked that it would be foolish for the company to continue to produce the handlebars at $40 each when it can buy them for $37 each. Calculate the total relevant cost per unit and total.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Jordan Bicycle Manufacturing Company currently produces the
handlebars used in manufacturing its bicycles, which are high-
quality racing bikes with limited sales. Jordan produces and sells
only 7,900 bikes each year. Due to the low volume of activity,
Jordan is unable to obtain the economies of scale that larger
producers achieve. For example, Jordan could buy the
handlebars for $37 each; they cost $40 each to make. The
following is a detailed breakdown of current production costs.
Item
Unit-level costs
Materials
Unit Cost Total
Labor
Overhead
$17
$134,300
11
86,900
3
23,700
71,100
$40
$316,000
Allocated facility-level costs 9
Total
After seeing these figures, Jordan's president remarked that it
would be foolish for the company to continue to produce the
handlebars at $40 each when it can buy them for $37 each.
Calculate the total relevant cost per unit and total.
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