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The One Wheel Company produces unicycles. One Wheel currently manufactures each wheel that it uses in the production of its unicycles. The costs for One
The One Wheel Company produces unicycles. One Wheel currently manufactures each wheel that it uses in the production of its unicycles. The costs for One Wheel to man ufacture 100,000 wheels annually are: Direct materials $20,000 $30,000 $15,000 $58,000 Direct labor Variable manufacturing overhead Fixed manufacturing overhead One Wheel has been approached by an outside supplier, Round and Round Corporation, which has offered to sell One Wheel similar wheels for $0.80 per wheel. One Wheel has determined that if the wheels are purch ased from the outside supplier, $13,000 of annual fixed overhead could be avoided. The facilities now being used by One Wheel to produce its own wheels could be rented out to another company for $35,000 per year. One Wheel has determined that direct labor is a variable cost in its operation s If One Wheel ch ooses to buy the wheel from the outside supplier, then annual net operating income would
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