Jordan Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are...
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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 10,000 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 $29 each, they cost $31 each to make. The following is a detailed breakdown of current production costs Unit Cost Total tem Unit-level costs Materials Labor Overhead 10 4 $31 $15 S 150,000 100,000 20,000 40,000 Allocated facility-level costs Total 310,000 After seeing these figures, Jordan's president remarked that it would be foolish for the company to continue to produce the handlebars at $31 each when it can buy them for $29 each Required Calculate the total relevant cost. Per Unit Total Total relevant cost Do you agree with the president's conclusion? Yes O No
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