Vernon Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Vernon produces and sells only 7,000 bikes each year. Due to the low volume of activity, Vernon is unable to obtain the economies of scale that larger producers achieve. For example, Vernon could buy the handlebars for $38 each; they cost $41 each to make. The following is a detailed breakdown of current production costs. Item Unit Cost Total Unit-level costs Materials $ 16 $ 112,000 Labor 11 77,000 Overhead 2 14,000 Allocated facility-level costs 12 84,000 Total $ 41 $ 287,000 After seeing these figures, Vernons president remarked that it would be foolish for the company to continue to produ