Prepare incremental analysis for the sell or process

Assignment Help Accounting Basics

Reference no: EM13257896

Donkey bikes could sell its bicycles to retailers eitherassembled or unassembled. The cost of an unassembled bike isas follows.

DirectMaterials $ 150

DirectLabor 70

Variable Overhead (71% of directlabor) 49

Fixed overhead (30% of directlabor) 21

Manufacturing perunit $290

The unassembled bikes are sold to retailers at $400 each.

Donkey currently has unused productive capacity that isexpected to continue indefinitely: Management has concluded thatsome of this capacity can be used to assemble the bikes andsell them at $450 each. Assembling the bikes will increase directmaterials by $5 per bike, and direct labor by $20 per bike.Additional variable overhead will be incurred at rhe normal ratesbut there will be no additional fixed overhead as a result ofassembling the bikes

Instructions

A. Prepare an incremental analysis for thesell or process further decision

B. Should Donkey sell or process further? Why or Why not?

Reference no: EM13257896

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