Question
Thomas Corporation makes bicycles. It has always purchased its bicycle tires from the Firelock Company at $11 each, but is currently considering making the tires
Thomas Corporation makes bicycles. It has always purchased its bicycle tires from the Firelock Company 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 $5 Variable manufacturing overhead $1 The companys fixed expenses would increase by $28,740 per year if managers decided to make the tire. (a1) Calculate total relevant cost to make or buy if the company needs 6,500 tires a year. Make Buy Total relevant cost $ $ (a2) Ignoring qualitative factors, if the company needs 6,500 tires a year, should it continue to purchase them from Firelock or begin to produce them internally? The company to purchase the tires.
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