oect s Questions Spring 201 Mailings Review View A 2+1 foaic D -, -.YE.. M CO Eel AaBbCcDc abCcDdE. AaBb A -E No Make or Buy- Sarasota Bicycles has been manufacturing its own wheels for its bikes. The company is currently operating at 100% capacity, and variable manufacturing overhead is charged to production at the rate of 30% of direct labor cost. The direct materials and direct labor cost per unit to make the wheels are $3.00 and $3.60 respectively. Normal production is 200,000 wheels per year. A supplier offers to make the wheels at a price of $8 each. If the bicycle company accepts this offer, all variable manufacturing costs will be eliminated, but the $84,000 of fixed manufacturing overhead currently being charged to the wheels will have to be absorbed by other products Required: a. Prepare an incremental analysis for the decision to make or buy the wheels. b. Should Sarasota Bicycles buy the wheels from the outside supplier? Justify your answer Check number Make Buy Direct materials Direct labor Variable manufacturing costs Purchase price (200,000x $8) Total annual cost $1,600,000 $1,xxx,000 b.2 MacBook Air