Question
Cullumber Bikes could sell its bicycles to retailers either assembled or unassembled. The cost of an unassembled bike is as follows. Direct materials Direct
Cullumber Bikes could sell its bicycles to retailers either assembled or unassembled. The cost of an unassembled bike is as follows. Direct materials Direct labor Variable overhead (70% of direct labor) Fixed overhead (30% of direct labor) Manufacturing cost per unit $192 90 63 27 $372 The unassembled bikes are sold to retailers at $546 each Cullumber has unused productive capacity that is expected to continue indefinitely; management has concluded that some of this capacity could be used to assemble the bikes and sell them at $581 each. Assembling the bikes will increase direct materials by $5 per bike and direct labor by $10 per bike. Additional variable overhead will be incurred at the normal rates, but there will be no additional foxed overhead as a result of assembling the bikes. Prepare an incremental analysis for the sell-or-process-further decision (Enter negative amounts using either a negative sign preceding the number es-45 or parentheses eg (45). Do not leave any field blank. Enter O for the amounts) v $ Sell Process Further Net Income Increase (Decrease)
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