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ts The Tracey Company produces wheels which are used in the production of bicycles. Tracey's costs to produce 100,000 wheels annually are: 30,000 50,000 20,000
ts The Tracey Company produces wheels which are used in the production of bicycles. Tracey's costs to produce 100,000 wheels annually are: 30,000 50,000 20,000 Direct materials Direct labor Variable overhead Fixed overhead Total $170,000 An outside supplier has offered to sell Tracey similar wheels for $1.25 per wheel. If the wheels were purchased from the outside supplier, $15,000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for $45,000 per year Required IfTracey chooses to buy the wheel from the outside supplier, then the change in annual net income due to accepting the offer would be: (be sure and tell me if it is an increase or decrease and only use the relevant costs) a. b. What is the highest price that Tracey could pay the outside supplier for the wheel and still be economically indifferent between making or buying the wheels? If Tracey continues to make the product, what is the accounting word that is used to describe the $45,000 rent that they are giving up? c
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