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Let's Roll, Inc. currently manufactures the wheels that it uses for its in-line skates. The annual costs to manufacture the 140,000 wheels needed each year
Let's Roll, Inc. currently manufactures the wheels that it uses for its in-line skates. The annual costs to manufacture the 140,000 wheels needed each year are as follows: |
Total Cost | ||||
Direct material | $ | 167,000 | ||
Direct labor | 48,000 | |||
Variable overhead | 54,000 | |||
Fixed overhead | 300,000 | |||
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Total | $ | 569,000 | ||
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Wheeling Company has offered to provide Let's Roll with all of its annual wheel needs for $3.40 per wheel. If Let's Roll accepts this offer, 65% of the fixed overhead above could be totally eliminated. Also, Let's Roll would be able to rent out the freed up space and could generate $78,000 of income annually. |
Required: | |
a. | Calculate the total relevant costs of making the wheels. (Omit the "$" sign in your response.) |
Total relevant cost of making | $ |
b. | Calculate the total relevant cost of buying. (Omit the "$" sign in your response.) |
Total relevant cost of buying | $ |
c. | Should Let's Roll, Inc. make or buy the wheels? |
(Click to select)BuyMake |
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