Ivanhoe Bikes could sell its bicycles to retailers either assembled or unassembled. The cost of an unassembled bike is as follows. Direct materials Direct
Ivanhoe Bikes could sell its bicycles to retailers either assembled or unassembled. The cost of an unassembled bike is as follows. Direct materials Direct labor $129 60 Variable overhead (70% of direct labor) 42 Fixed overhead (30% of direct labor) 18 Manufacturing cost per unit $249 The unassembled bikes are sold to retailers at $411 each. Ivanhoe 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 $455 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 fixed overhead as a result of assembling the bikes.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started