nkt.1 Zachary Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-qualityracing bikes with limited sales. Zachary produces and sells only 7,000 bikes each year. Due to the low volume of activity, Zachary isunable to obtain the economies of scale that larger producers achieve. For example, Zachary could buy the handlebars for $40 each;they cost $43 each to make. The following is a detailed breakdown of current production costs.ItemUnit-level costsMaterialsLaborOverheadAllocated facility-level costsTotalUnit CostTotal$ 1811$ 126,00077,00021214,00084,000$ 43$ 301,000After seeing these figures, Zachary's president remarked that it would be foolish for the company to continue to produce thehandlebars at $43 each when it can buy them for $40 each.RequiredCalculate the total relevant cost. Do you agree with the president's conclusion?Per UnitTotalTotal relevant costDo you agree with the president's conclusion?

The relevant costs are the costs that are affected by the manager's decision, which means they…

Zachary Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Zachary produces and sells only 7,000 bikes each year. Due to the low volume of activity, Zachary is unable to obtain the economies of scale that larger producers achieve. For example, Zachary could buy the handlebars for $40 each; they cost $43 each to make. The following is a detailed breakdown of current production costs. Item Unit-level costs Unit Cost Total Materials Labor $ 18 11 $ 126,000 77,000 Overhead 2 14,000 Allocated facility-level costs Total 12 84,000 $ 43 $ 301,000 After seeing these figures, Zachary's president remarked that it would be foolish for the company to continue to produce the handlebars at $43 each when it can buy them for $40 each. Required Calculate the total relevant cost. Do you agree with the president's conclusion? Per Unit Total Total relevant cost Do you agree with the president's conclusion?

Zachary Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Zachary produces and sells only 7,000 bikes each year. Due to the low volume of activity, Zachary is unable to obtain the economies of scale that larger producers achieve. For example, Zachary could buy the handlebars for $40 each; they cost $43 each to make. The following is a detailed breakdown of current production costs. Item Unit-level costs Unit Cost Total Materials Labor $ 18 11 $ 126,000 77,000 Overhead 2 14,000 Allocated facility-level costs Total 12 84,000 $ 43 $ 301,000 After seeing these figures, Zachary's president remarked that it would be foolish for the company to continue to produce the handlebars at $43 each when it can buy them for $40 each. Required Calculate the total relevant cost. Do you agree with the president's conclusion? Per Unit Total Total relevant cost Do you agree with the president's conclusion?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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