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Thornton Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Thornton produces and

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Thornton Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Thornton produces and sells only 6,300 bikes each year. Due to the low volume of activity, Thornton is unable to obtain the economies of scale that larger producers achieve. For example, Thornton could buy the handlebars for $37 each; they cost $40 each to make. The following is a detailed breakdown of current production costs. Item Unit-level costs Unit Cost Total Materials Labor $15 $ 94,500 10 63,000 Overhead 3 18,900 Allocated facility-level costs Total 12 75,600 $40 $252,000 After seeing these figures, Thornton's president remarked that it would be foolish for the company to continue to produce the handlebars at $40 each when it can buy them for $37 each. Required Calculate the total relevant cost. Do you agree with the president's conclusion? Per Unit Total Total relevant cost Do you agree with the president's conclusion?

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