Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Cruger Bike Company (CBC) makes the frames used to build ts bicycles. During 2014, CBC made 20,000 frames; the costs ncurred follow. Una-levelmaterials costs (20.000

image text in transcribed
image text in transcribed
image text in transcribed
Cruger Bike Company (CBC) makes the frames used to build ts bicycles. During 2014, CBC made 20,000 frames; the costs ncurred follow. Una-levelmaterials costs (20.000 S 600000 Unit-evel labor costs (20.000 units Unit-level overhead costs 20000 manufacturing equipment Bae frame production supervisor's salary Inventory holding costs Allocated portion of facitylevel costs CBC has an opportunity to purchase frames for $85 each. Additional Information The manufacturing equipment, which originally cost $550,000, has a book value of $450,000, a remaining useful life of four years, and a zero salvage value. If the equipment is not used to produce bicycle frames, it can be leased for $70,000 per year. 2 CBC has the opportunity to purchase for $910,000 new manufacturing equipment that wil have an expected useful life of four years and a salvage value of$70,000. This equipment will increase productivity substantial ly, reducing unit-level labor costs by 60 percent. Assume that CBC will continue to produce and sell 20,000 frames per year in the future If CBC outsources the frames, the company can eliminate 80 percent of the inventory holding costs. Required Determine the avoidable cost per unit of making the bike frames, assuming that CBC is considering the alternatives of making the product using the existing equipment or outsourcing the product to the independent contractor. (Round your answer to 2 decimal places.) Should CBC outsource the bike frames

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Practice Of Modern Internal Auditing

Authors: Lawrence B Sawyer

2nd Edition

0894130927, 978-0894130922

More Books

Students also viewed these Accounting questions

Question

What are the purposes of promotion ?

Answered: 1 week ago