Question
Monty Racers makes bicycles. It has always purchased its bicycle tires from the Crane Tires at $26 each but is currently considering making the tires
Monty Racers makes bicycles. It has always purchased its bicycle tires from the Crane 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 Direct labor Variable manufacturing overhead The company's fixed expenses would increase by $61,000 per year if managers decided to make the tire. (a1) Calculate total relevant cost to make or buy if the company needs 10,100 tires a year. Total relevant cost $ $8 $5 $7 The company should continue Make $ (a2) Ignoring qualitative factors, if the company needs 10,100 tires a year, should it continue to purchase them from Balyo or begin to produce them internally? Buy to purchase the tires.
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