Sandhill Bikes could sell its bicycles to retailers either assembled or unassembled. The cost of an unassembled bike is as follows. Direct materials Direct labor $147 70 Variable overhead (70% of direct labor) 49 Fixed overhead (30% of direct labor) 21 Manufacturing cost per unit $287 The unassembled bikes are sold to retailers at $451 each. Sandhill 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 $491 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.