Bramble Rides makes bicycles. It has always purchased its bicycle tires from the Balyo Tires...
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Bramble 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 | $3 | ||
| Direct labor | $5 | ||
| Variable manufacturing overhead | $1 |
The companys fixed expenses would increase by $29,310 per year if managers decided to make the tire. (a1) Calculate total relevant cost to make or buy if the company needs 6,310 tires a year.
(a2) Ignoring qualitative factors, if the company needs 6,310 tires a year, should it continue to purchase them from Balyo or begin to produce them internally?
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