3. Top Gear Bikes could sell its bicycles to retailers either assembled or unass

Question

3. Top Gear Bikes could sell its bicycles to retailers either assembled or unassembled The cost of an unassembled bike is as follows $150 70 49 21 $290 Direct materials Direct labor Variable overhead (70% of direct labor) Fixed overhead (30% of direct labor) Total manufacturing cost per unit The unassembled bikes are sold to retailers at S400 each. Top Gear currently has unused productive capacity that is expected to continue indefinitely; management has concluded that some of this capacity can be used to assemble the bikes; the assembled bikes could be sold for $450 each. Assembling the bikes will increase direct materials by $5 per bike, and direct labor by $20 per bike Additional variable overhead will be incurred at the normal rates, but there will be no additional fixed overhead as a result of assembling the bikes. The demand for unassembled versus assembled bikes is the same Instructions Should Top Gear sell unassembled or assembled bikes? Why or why not?

Explanation / Answer

Prepare an incremental analysis for the sell or process further decision Sell Process further Increase/ Decrease Selling price per unit 400 450 50 Cost per unit Materials 150 155 -5 Labor 70 90 -20 Variable overhead 49 63 -14 Fixed overhead 21 21 0 Total 290 329 -39 Profit per unit 110 121 11 90*70%=63

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

---

---

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