Kai.9 Thornton Bicycle Manufacturing Company currently produces the handlebars used in manufacturingits bicycles, which are high-quality racing bikes with limited sales. Thornton produces and sells only7,300 bikes each year. Due to the low volume of activity, Thornton is unable to obtain the economiesof scale that larger producers achieve. For example, Thornton could buy the handlebars for $31 each;they cost $34 each to make. The following is a detailed breakdown of current production costs.ItemUnit-level costsMaterialsLaborOverheadAllocated facility-level costsTotalPer UnitUnit CostTotal relevant costDo you agree with the president's conclusion?$1510After seeing these figures, Thornton's president remarked that it would be foolish for the company tocontinue to produce the handlebars at $34 each when it can buy them for $31 each.RequiredCalculate the total relevant cost. Do you agree with the president's conclusion?No36$ 34Total$ 109,50073,00021,90043,800$ 248,200Total

Lets understand the basics.Relevant cost primarily used in managerial accounting.. The relevant cost…

Answered: Thornton Bicycle Manufacturing Company…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

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
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
Steele Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racingbikes with limited sales. Steele produces and sells only 10,000 bikes each year. Due to the low volume of activity, Steele is unable to obtainthe economies of scale that larger producers achieve. For example, Steele could buy the handlebars for $31 each; they cost $34 each tomake. The following is a detailed breakdown of current production costs. Item Unit Cost Total Unit Level Costs Materials $16 160,000 Labor 12 120,000 Overhead 2 20,000 Allocated Facility Level Cost 4 40,000 Total $34 340,000 After seeing these figures, Steele’s president remarked that it would be foolish for the company to continue to produce the handlebars at $34each when it can buy them for $31 each.RequiredCalculate the total relevant cost. Do you agree with the president’s conclusion? Per Unit Total Total Relevant Cost
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
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…
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…
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 6,700 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?
Helmer Containers manufactures a variety of boxes used for packaging. Sales of its Model A20 box have increased significantly to a total of 460,000 A20 boxes. Helmer has enough existing production capacity to make all of the boxes it needs. The variable cost of making each A20 box is $0.82.By outsourcing the manufacture of these A20 boxes, Helmer can reduce its current fixed costs by $115,000. There is no alternative use for the factory space freed up through outsourcing, so it will just remain idle. What is the maximum Helmer will pay per Model A20 box to outsource production of this box?
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

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS