King City Specialty Bikes (KCSB) produces high-end bicycles. The costs to manufacture and market the bicycles at the company's volume of 2,000 units per month are shown in the following table:

6.00 points King City Specielty Bikes (KCSB) produces high-end bicydles. The costs to manufacture and market the bicycles at the company's velume of 2,000 units per month are shown in the fellowing table: Unt manufacturing coss 3280 Variable costs Fixed overheed 374 Total unt manufacturing costs Unt 50 Total unit nonmanufacturing coats 184 3558 Total unit costs The company has the capacity to produce 2.,000 units per month and always operates at full capacity. The bicycles sell for $600 per unit. Required: a. KCS8 receives a proposal from an outside contractor who wil assemble 800 of the 2,000 sssemble, box, and ship the bicycles. The variable manufacturing costs would be reduced by 30 percent for the 800 bicycles assembled by the outside contractor. KCSB's fxed nonmanufacturing costs would be unaffected, but its variable nonmenufacturing costs would be out by 70 percent for these 800 units produced by the outside contractor. KCS's plant would operate at 60 percent of its normal level, and total fxed manufacturing costs would be cut by 25 percent. per month and ship them drectly to KCSB's customers as orders are received from KCSB's sales force. KCSB would provide the materials for each bicycle, but the outaide contractor would a-1. Calaulato the in-house unit cost that must be compared with the cuctation received from the outs de contractor. Assume the payment to the outs de contractor is $130. a-2. Should the propcsal be accaped for a price (that is, payment to the contractor) of $130 por unit? Yos O No b. Assume the same facts as in requirement (e) but assume that the idle faciities would be used to produce 80 specialty racing bicydes per month These racing bicycles could be scld for 57400 each while the costs of production would be $5,000 per unt variable manulacturing ccst. Variable markeing costs would be $140 per uni Fixed nonmanufacturing and manufacturing costs would be unchanged whether the criginal 2.000 regular bicycles were manufactured or the mix of 1.200 regular bicycles plus 80 rating bicycles was produced. What is the total net profblcss for he b-1, when the company produces and sells 2.000 units of regular bicycles per month. Assume the payment the outside contractor is $130. b-2. When the company produces 1,200 units of rogular bicycles and uso the idle faclites bo produco 80 specialy racing bicycles per month b-3. Should the contractor's proposal of $130 per unit be accepted? O Yes O No