FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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. |
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