Question: Hill Bicycle Manufacturing company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Hill produces and sells only 6,000 bikes per year. Due to the low volume of activity, Hill could buy the handlebars for $28 each; they cost $32 to make. The following is a detailed breakdown of current production costs.
Item Unit Cost Total
Unit-level costs
Materials $14 $84,000
Labor $10 $60,000
Overhead $ 3 $18,000
Allocated facility-level costs $ 5 $30,000
Total $32 $192,000
After seeing these figures, Hill's president remarked that it would be foolish for the company to continue to produce the handlebars at $32 each when it can buy them for $28 each. Do you agree with president's conclusion? Support your answer with appropriate computations.