Question 12.10: A cycling shop is deciding whether to sell bicycles assemble...

Management Accounting in a Dynamic Environment

A cycling shop is deciding whether to sell bicycles assembled or unassembled. An unassembled bicycle is purchased by the store for $100 and can be sold unassembled for $200. To assemble a bicycle requires one hour of labor time. Labor costs $16 per hour. If the shop assembles the bicycle, it sells for $275. At a price of $275, the number of assembled bicycles sold would equal the number sold unassembled. Should the bicycle be assembled by the cycling shop or sold unassembled?

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