Speedy Bikes could sell its bicycles to retailers either assembled or unassembled. The cost of an unassembled bike is as follows:

Direct materials $150
Direct labor 70
Variable overhead (70% of direct labor) 49
Fixed overhead (30% of direct labor) 21
Manufacturing cost per unit $290

The unassembled bikes are sold to retailers at $450 each.

Speedy currently has unused productive capacity that is expected to continue indefinitely; management has concluded that some of this capacity can be used to assemble the bikes and sell them at $495 each. Assembling the bikes will increase direct materials by $5 per bike, and direct labor by $10 per bike. Additional variable overhead will be incurred at the normal rates, but there will be no additional fixed overhead as a result of assembling the bikes.

Additional variable overhead will be incurred at the normal rates but there will be no additional fixed overhead as a result of assembling the bikes.

Required:
a. Prepare an incremental analysis for the sell-or-process-further decision.
b. Should Speedy sell or process further?

Why or why not?

Speedy Bikes

a. Incremental Analysis for the sell-or-process-further decision:

                                                       Cost of an              Cost an    Difference

                                                   unassembled bike  assembled bike

                                                     Alternative 1          Alternative 2 Increment

Sales price of unassembled bike      $450                     $495           $45

Manufacturing cost per unit              $290                      $312            (22)

Net operating income                        $160                       $183           $23

b. Speedy should process the bikes further.

c. It will generate an incremental net operating income of $23 per bike.

Explanation:

a) Data and Calculations:

                                                       Cost of an              Cost an

                                                   unassembled bike  assembled bike

Direct materials                                    $150                      $155

Direct labor                                               70                         80

Variable overhead (70% of direct labor) 49                         56 ($80 * 70%)

Fixed overhead (30% of direct labor)      21                          21

Manufacturing cost per unit               $290                      $312

(i know i'm late but the answer's "things about yourself" because you want to list things you're capable of, why you want to open up the business, the amount of money you're putting into it,etc.) i'm guessing you take online school small business, the answers to the quizzes are all over quizlet. just look up your question and type quizlet after it and it'll pop up.

answer; according to the ( irs );