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Finch Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high - quality racing bikes with limited sales. Finch produces
Finch Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are highquality racing bikes with limited sales. Finch produces and sells only bikes each year. Due to the low volume of activity, Finch is unable to obtain the economies of scale that larger producers achieve. For example, Finch could buy the handlebars for $ each; they cost $ each to make. The following is a detailed breakdown of current production costs.
Item Unit Cost Total
Unitlevel costs
Materials $ $
Labor
Overhead
Allocated facilitylevel costs
Total $ $
After seeing these figures, Finchs president remarked that it would be foolish for the company to continue to produce the handlebars at $ each when it can buy them for $ each.
Required
Calculate the total relevant cost. Do you agree with the presidents conclusion?
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