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 6,200 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. Unit Total Item Cost Unit-level costs Materials $17 $105,400 55,800 12,400 Labor Overhead 2 Allocated facility-level 74,400 12 costs $40 $248,000 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 Required: a. Calculate the total relevant cost. Total Per Unit Total relevant cost b. Do you agree with the president's conclusion? Yes No O O

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 6,200 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. Unit Total Item Cost Unit-level costs Materials $17 $105,400 55,800 12,400 Labor Overhead 2 Allocated facility-level 74,400 12 costs $40 $248,000 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 Required: a. Calculate the total relevant cost. Total Per Unit Total relevant cost b. Do you agree with the president's conclusion? Yes No O O

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter8: Tactical Decision-making And Relevant Analysis

Section: Chapter Questions

Problem 54P

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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 7,400 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 $33 each; they cost $36 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 Unit Cost $17 8 2 9 $36 Per Unit Total relevant cost Do you agree with the president's conclusion? After seeing these figures, Jordan's president remarked that it would be foolish for the company to continue to produce the handlebars at $36 each when it can buy them for $33 each. Total $125,800 59,200 14,800 66,600 $266,400 Required Calculate the total relevant cost. Do you agree with the president's conclusion? Total
Benson Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Benson produces and sells only 7,400 bikes each year. Due to the low volume of activity, Benson is unable to obtain the economies of scale that larger producers achieve. For example, Benson could buy the handlebars for $29 each; they cost $32 each to make. The following is a detailed breakdown of current production costs. Item Unit-level costs Unit Cost Total Materials Labor Overhead $ 13 9 $ 96,200 66,600 Allocated facility-level costs Total 2 8 14,800 59,200 $ 32 $ 236,800 After seeing these figures, Benson's president remarked that it would be foolish for the company to continue to produce the handlebars at $32 each when it can buy them for $29 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? No I
Vernon Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Vernon produces and sells only 6,900 bikes each year. Due to the low volume of activity, Vernon is unable to obtain the economies of scale that larger producers achieve. For example, Vernon could buy the handlebars for $33 each; they cost $36 each to make. The following is a detailed breakdown of current production costs. Item Unit Cost Total Unit-level costs $103,500 82,800 13,800 48,300 Materials $15 Labor 12 Overhead Allocated facility-level costs 2 Total $36 $248,400 After seeing these figures, Vernon's president remarked that it would be foolish for the company to continue to produce the handlebars at $36 each when it can buy them for $33 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?
Adams Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Adams produces and sells only 6,200 bikes each year. Due to the low volume of activity, Adams is unable to obtain the economies of scale that larger producers achieve. For example, Adams could buy the handlebars for $30 each; they cost $33 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 Unit Cost $15 9 2 7 $33 Total $ 93,000 55,800 12,400 43,400 $204,600 After seeing these figures, Adams's president remarked that it would be foolish for the company to continue to produce the handlebars at $33 each when it can buy them for $30 each. Required Calculate the total relevant cost. Do you agree with the president's conclusion? Answer is complete but not entirely correct. Per Unit Total
Campbell Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high- quality racing bikes with limited sales. Campbell produces and sells only 7,700 bikes each year. Due to the low volume of activity, Campbell is unable to obtain the economies of scale that larger producers achieve. For example, Campbell could buy the handlebars for $33 each; they cost $36 each to make. The following is a detailed breakdown of current production costs. Item Unit Cost Total Unit-level costs $13 $100, 100 92,400 23,100 61,600 Materials Labor 12 Overhead Allocated facility-level costs 8 Total $36 $277,200 After seeing these figures, Campbell's president remarked that it would be foolish for the company to continue to produce the handlebars at $36 each when it can buy them for $33 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…
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 6,700 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 $40 each; they cost $43 each to make. The following is a detailed breakdown of current production costs. Unit Total Item Cost Unit-level costs $ 113,900 60,300 13,400 $17 Materials Labor 9 Overhead 2 Allocated facility-level 15 100,500 Costs Total $43 $288,100 After seeing these figures, Jordan'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: a. Calculate the total relevant cost Per Unit Total Total relevant cost b.Do you agree with the president's conclusion? Yes O No
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 6,200 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 $32 each; they cost $35 each to make. The following is a detailed breakdown of current production costs Unit Cost Total Item Unit-level costs 16 99,200 62,000 18,600 Materials Labor 10 Overhead 3 Allocated facility-level 6 37,200 Costs $35 $217,000 Total After seeing these figures, Jordan's president remarked that it would be foolish for the company to continue to produce the handlebars at $35 each when it can buy them for $32 each Required: a. Calculate the total relevant cost. Per Unit Total Total relevant cost b. Do you agree with the president's conclusion? Yes ONo оо
The EKTA Company, founded in 1992, is a manufacturer and exporter ofhigh-end bicycles. Its assembly division buys bicycle frames from the framedivision and assembles the bicycles.The frame division, which is operating at capacity, incurs an incrementalmanufacturing cost of $65 per frame. The frame division can sell all its output to the outside market at a price of $100 per frame, after incurring a variable marketing and distribution cost of $8 per frame. If the assembly division purchases frames from outside suppliers at a price of $100 per frame, it will incur a variable purchasing cost of $7 per frame. EKTA’s division managers can act autonomously to maximize their own division’s operating income. The EKTA’s main competitor does not manufacture their bicycleframes. They purchase the frames from outside suppliers for theirAssembly Division. Do you believe that this difference in operationsgives either EKTA or their competitor a pricing advantage over theother?
Mallory’s Video Supply has changed its focus tremendously and as a result has dropped the selling price of DVD players from $45 to $38. Some units in the work-in-process inventory have costs of $30 per unit associated with them, but Mallory can only sell these units in their current state for $22 each. Otherwise, it will cost Mallory $11 per unit to rework these units so that they can be sold for $38 each. How much is the financial impact if the units are processed further? a. $5 per unit profit b. $3 per unit loss c. $16 per unit profit d. $12 per unit loss
Munoz Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Munoz produces and sells only 7,900 bikes each year. Due to the low volume of activity, Munoz is unable to obtain the economies of scale that larger producers achieve. For example, Munoz 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 Cost Total Unit-level costs Materials $ 14 $ 110,600 Labor 9 71,100 Overhead 2 15,800 Allocated facility-level costs 15 118,500 Total $ 40 $ 316,000 After seeing these figures, Munoz’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. Required Calculate the total relevant cost. Do you agree with the president’s…
Scrooge McDuck Safe Limited is considering buying the hinges it uses in the manufacture of vaults from an outside vendor. Currently, Scrooge McDuck Safe Limited makes the hinges in its own manufacturing facility. Scrooge McDuck Safe Limited can buy the hinges for $1.50 each. The company uses 900,000 hinges each year. Fixed cost for Scrooge McDuck Safe Limited would not change if the company stopped making the hinges. Information about Scrooge McDuck Safe Limited's cost to manufacture the 900,000 casters follows: Per Unit $.50 .10 Total Direct material $450,000 90,000 360,000 225.000 $1,125,000 Direct labor Variable overhead Fixed overhead Total .40 25 $1.25 Required: A. Prepare a relevant cost schedule that indicates whether Scrooge McDuck Safe Limited should buy the hinges or continue to make them. B. If Scrooge purchased the hinges, management has approached you that a dial producer wishes to rent the vacant space for $150,000 to produce their dials. Does this change your decision??…
Swan Company has two divisions, Hill and Paradise. Hill produces a unit that Paradise could use in its production. Paradise currently is purchasing 5,600 units from an outside supPplier for $62. Hill is operating at less than full capacity and has variable costs of $36.80 per unit. The full cost to manufacture the unit is $49.40. Hill currently sells 450,600 units at a selling price of $67.60. How much will Paradise save by not purchasing from outside if a transfer price of $48 is agreed upon? Multiple Choice $78,400 $56,600 $7,600 more cost $28,600