Sheffield Rides makes bicycles. It has always purchased its bicycle tires from the Balyo Tires at $11 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		$4
Direct labor		$4
Variable manufacturing overhead		$2

The companys fixed expenses would increase by $29,820 per year if managers decided to make the tire. (a1) Calculate total relevant cost to make or buy if the company needs 5,460 tires a year.

	Make	Buy
Total relevant cost	$	$

(a2) Ignoring qualitative factors, if the company needs 5,460 tires a year, should it continue to purchase them from Balyo or begin to produce them internally?

The company should continueshould not continue to purchase the tires.