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12. John Deere Manufacturing Company produces the 9RX tractors with 30- or 36-inch tracks. John Deere produces 40,000 30-inch tracks each year. The product
12. John Deere Manufacturing Company produces the 9RX tractors with 30- or 36-inch tracks. John Deere produces 40,000 30-inch tracks each year. The product cost for each track is $131, computed as follows: DM $57 DL 25 VMOH 19 FMOH Unit Cost 30 $131 The 30-inch track can be purchased from an outside supplier for only $108 each. The space in which the tracks are now produced would be idle and fixed production costs would be reduced by one-fourth. Based on these data, the financial advantage (disadvantage) of purchasing the tracks from the outside supplier needs to be determined. Calculate the following and determine if John Deere should continue to make the 30-inch tracks or buy them. 1. Total cost to make 2. Total cost to buy 3. Financial advantage or (disadvantage) to buy 4. Should John Deere make or buy?
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