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Bikes R Us could se its bicycles to retailers either assembled or unassembled. The cost of an unassembled bike is as follows. S250 70 Direct
Bikes R Us could se its bicycles to retailers either assembled or unassembled. The cost of an unassembled bike is as follows. S250 70 Direct materials Direct labor Variable overhead (70% of direct labor) Fixed overhead (30% of direct labor) 49 21 The unassembled bikes are sold to retailers at $460 each. The Company 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 and sell them at S525 each. Assembling the bikes will increase direct materials by $4 per bike, and direct labor by S10 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 Instructions (a) Prepare an incremental analysis for the sell-or-process-further decision. (b)Should Bikes R Us sell or process further? Why or why not
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