Transcribed Image Text: Jordan Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Jordan

Transcribed Image Text: 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

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