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Baird Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are...

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Accounting

Baird Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Baird produces and sells only 6,600 bikes each year. Due to the low volume of activity, Baird is unable to obtain the economies of scale that larger producers achieve. For example, Baird could buy the handlebars for $36 each; they cost $39 each to make. The following is a detailed breakdown of current production costs.

Item Unit Cost Total
Unit-level costs
Materials $ 14 $ 92,400
Labor 9 59,400
Overhead 3 19,800
Allocated facility-level costs 13 85,800
Total $ 39 $ 257,400

After seeing these figures, Bairds president remarked that it would be foolish for the company to continue to produce the handlebars at $39 each when it can buy them for $36 each. Required Calculate the total relevant cost. Do you agree with the presidents conclusion?

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