Jordan Bicycle Manufacturing Company currently produces the handlebars used in m

Question

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 6,500 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. 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. Required: a. Calculate the total relevant cost. Total relevant cost

Explanation / Answer

Solution:

Relevant Total Cost Caluculation:

Direct Material Cost = $ 84,500

Direct Labour Cost = $ 58,500

Overhead Cost = $ 19,500

Total Cost = $ 1,62,500

   Relevant Cost = $ 1,62,500

Per Unit Relevant Cost Caluculation:

Direct Material = $ 13

Direct Labour = $ 9

Overheads = $ 3

   Total Cost = $ 25

Total Televant Cost Per Unit = $ 25

Related Questions

Navigate

• Browse (All)
• Browse J
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.