Exercise 6-10A (Algo) Outsourcing decision LO 6-3 Solomon Bicycle Manufacturing Company currently produces the handlebars...
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Exercise 6-10A (Algo) Outsourcing decision LO 6-3 Solomon Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Solomon produces and sells only 7,300 bikes each year. Due to the low volume of activity, Solomon Is unable to obtain the economies of scale that larger producers achieve. For example, Solomon could buy the handlebars for $35 each; they cost $38 each to make. The following is a detailed breakdown of current production costs. Unit Cost Total $15 Item Unit-level costs Materials Labor Overhead Allocated facility-level costs Total 8 2 13 $38 $109,500 58,400 14,600 94,900 $277,400 After seeing these figures, Solomon's president remarked that it would be foolish for the company to continue to produce the handlebars at $38 each when it can buy them for $35 each. Required Calculate the total relevant cost. Do you agree with the president's conclusion? Total Per Unit Total rolevant cost Do you agree with the president's conclusion
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