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King City Specialty Bikes (KCSB) produces high-end bicycles. The unit costs to manufacture and market the bicycles at last year's volume level of 2, 100
King City Specialty Bikes (KCSB) produces high-end bicycles. The unit costs to manufacture and market the bicycles at last year's volume level of 2, 100 bicycles per month are shown in the following table: KCSB expects to produce and sell 2, 500 bicycles per month in the coming year. The bicycles sell for $620 each. KCSB receives a proposal from an outside contractor who, for $150 per bicycle, will assemble 700 bicycles per month and ship them directly to KCSB's customers as orders are received from KCSB's sales force, KCSB would provide the materials for each bicycle, but the outside contractor would assemble, box, and ship the bicycles. The variable manufacturing costs would be reduced by 40% for the 700 bicycles assembled by the outside contractor, and variable nonmanufacturing costs for the 700 bicycles would be cut by 60%. KCSB's marketing manager thinks that it could sell 90 specialty racing bicycles per month for $6, 500 each, and its production manager thinks that it could use the idle resources to produce each of these bicycles for variable manufacturing costs of $5, 300 per bicycle and variable nonmanufacturing costs of $300 per bicycle. If KCSB accepts the proposal, it would be able to save 5% of fixed manufacturing costs; fixed nonmanufacturing costs would be unchanged. What is the difference in KCSB's monthly costs between accepting the proposal and rejecting the proposal
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