Answered step by step
Verified Expert Solution
Question
1 Approved Answer
please see the document to answer the question i have Be careful when you use the data to determine fixed costs. And make sure you
please see the document to answer the question i have
Be careful when you use the data to determine fixed costs. And make sure you understand the two alternatives. The "make" means that KCSB makes, assembles, and ships all of its bicycles. The "buy" means that KCSB . makes, assembles, and ships some of its bicycles, . makes some of its bicycles and pays another rm to assemble and ship them, and o uses idle resources to make and sell specialty racing bicycles 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 1,850 bicycles per month are shown in the following table: Unit manufacturing costs Variable $226 Fixed 123 Total unit manufacturing costs $349 KCSB expects to produce and sell 2,200 bicycles per month in the coming year. The bicycles sell for $600 each. KCSB receives a proposal from an outside contractor who, for $150 per bicycle, will assemble 900 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 900 bicycles assembled by the outside contractor, and variable nonmanufacturing costs for the 900 bicycles would be cut by 60%. KCSB's marketing manager thinks that it could sell 80 specialty racing bicycles per month for $5,500 each, and its production manager thinks that it could use the idle resources to produce each of these bicycles for variable manufacturing costs of $4,400 per bicycle and variable nonmanufacturing costs of $300 per bicycle. If KCSB accepts the proposal, it would be able to save 10% of fixed manufacturing costs; xed nonmanufacturing costs would be unchanged. REQUIRED [Note: Round unit cost computations to the nearest cent] What is the difference in KCSB's monthly costs between accepting the proposal and rejecting the proposal? (Note: If the costs of accepting the proposal are less than the costs of rejecting it, enter the difference as a positive number; if the accept costs are more than the reject costs, enter the difference as a negative number.)Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
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