Reference no: EM133609350

Question: Justin studied relevant costing in his introductory and upper-level accounting courses, but never thought he would use those skills-let alone so soon! Yet here he is, in the second month of his summer internship at a snowmobile and personal watercraft manufacturing company. His boss, Jeff, needs help. The company currently makes its own handlebar kits for all snowmobile models and personal watercraft models. Variable costs to produce one batch of 120 units are as follows. Variable Costs to Make DM $12,000 DL 16,000 Variable-MOH 3,000 The company's fixed manufacturing costs related to the handlebar kits amount to $15,000. One-third of these costs are avoidable if it chooses to buy these components rather than make them in-house. Jeff is receiving some pressure from company executives to find cost savings in operations and processes. The handlebar kit is the starting point in his review of products and processes. Required What is the relevant cost to make one handlebar kit? If a supplier approached Justin's boss and offered to sell the company handlebar kits for $400 each, what would Jeff's response be? Why? If a supplier offered to sell the company handlebar kits for $250 each, what would Jeff's response be?