Cameron University Operations And Supply Chain Management Assignment Help - Roaming Bicycle

Question - Exercises: 13-8

Roaming Bicycle
Manufacturing Company currently produces the handlebars used in manufacturing
its bicycles, which are high-quality racing bikes with limited sales. Roaming produces
and sells only 6,000 bikes each year. Due to the low volume of activity,
Roaming is unable to obtain the economies of scale that larger producers
achieve. For example, Roaming could buy the handlebars for $35 each; they cost
$38 each to make. The following is a detailed breakdown of current production
costs.


Item Unit Cost Total Unit-level
costs


Materials $ 18
108,000

Labor 12
72,000

Overhead 3
18,000

Allocated facility-level
costs 5 Total $ 38
$ 228,000


After seeing the
figures, Roaming's president rem ...Read More arked that it would be foolish for the company
to continue to produce the handlebars at $38 each when it can buy them for $35
each


Do you agree with the president's conclusion?
Support your answers with appropriate computations. ...Read Less

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