ridgeport Racers makes bicycles. It has always purchased its bicycle tires from the Cullumber Tires at $26 each but is currently considering making the tires in its own factory. The estimated costs per unit of making the tires are as follows: Direct materials $9 Direct labor $5 Variable manufacturing overhead $8 The company’s fixed expenses would increase by $73,000 per year if managers decided to make the tire. (a1) Calculate total relevant cost to make or buy if the company needs 11,300 tires a year. Make Buy Total relevant cost $enter a dollar amount $enter a dollar amount (a2) Ignoring qualitative factors, if the company needs 11,300 tires a year, should it continue to purchase them from Balyo or begin to produce them internally? The company select an option should not continueshould continue to purchase the tires.
ridgeport Racers makes bicycles. It has always purchased its bicycle tires from the Cullumber Tires at $26 each but is currently considering making the tires in its own factory. The estimated costs per unit of making the tires are as follows: Direct materials $9 Direct labor $5 Variable manufacturing overhead $8 The company’s fixed expenses would increase by $73,000 per year if managers decided to make the tire. (a1) Calculate total relevant cost to make or buy if the company needs 11,300 tires a year. Make Buy Total relevant cost $enter a dollar amount $enter a dollar amount (a2) Ignoring qualitative factors, if the company needs 11,300 tires a year, should it continue to purchase them from Balyo or begin to produce them internally? The company select an option should not continueshould continue to purchase the tires.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Bridgeport Racers makes bicycles. It has always purchased its bicycle tires from the Cullumber Tires at $26 each but is currently considering making the tires in its own factory. The estimated costs per unit of making the tires are as follows:
| Direct materials | $9 | ||
| Direct labor | $5 | ||
| Variable manufacturing |
$8 |
The company’s fixed expenses would increase by $73,000 per year if managers decided to make the tire.
(a1) Calculate total relevant cost to make or buy if the company needs 11,300 tires a year.
|
Make
|
Buy
|
|
|---|---|---|
|
Total relevant cost
|
$enter a dollar amount | $enter a dollar amount |
(a2) Ignoring qualitative factors, if the company needs 11,300 tires a year, should it continue to purchase them from Balyo or begin to produce them internally?
| The company select an option should not continueshould continue to purchase the tires. |
Transcribed Image Text:Bridgeport Racers makes bicycles. It has always purchased its bicycle tires from the Cullumber Tires at $26 each but is currently
considering making the tires in its own factory. The estimated costs per unit of making the tires are as follows:
Direct materials
$9
Direct labor
$5
Variable manufacturing overhead
$8
The company's fixed expenses would increase by $73,000 per year if managers decided to make the tire.
(a1) Calculate total relevant cost to make or buy if the company needs 11,300 tires a year.
Make
Buy
$
Total relevant cost
$
(a2) Ignoring qualitative factors, if the company needs 11,300 tires a year, should it continue to purchase them from Balyo or begin
to produce them internally?
The company
to purchase the tires.
%24
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