You are a financial manager for Zoom Corp., which manufacturesbicycles. In the most recent fiscal year,                    
Zoom manufactured and sold 20,000 bicycles. Wheels, seats, andbrake calipers are three components of                    
the bicycles currently manufactured by Zoom. Three differentvendors have proposed to provide those                     
components to Zoom, and quoted prices (including shipping) fortheir delivery. Your task is to determine                    
which, if any, of these proposals should be accepted.                    

Prepare a make vs. buy incremental analysis for each possiblecourse of action in an Excel worksheet. Your                    
grade will be based on the correctness of your answers, as well asthe use of Excel. That is, where possible,                     
you should use formulas to get your answers, rather than keyed-invalues. See your instructor for help with                     
Excel basics if you need it.                    

In a Word document, prepare a memo stating which of theproposals you suggest accepting, as well as the                    
basis for your conclusions. Also identify any nonfinancial factorsyou should consider before accepting any                    
of the outsourcing proposals.         

Below is cost data for Zoom's production of wheels, seats, andcalipers. Outside suppliers have offered to                    
provide wheels for $6.90, seats for $9.39, and calipers for $2.14per piece. Both wheels and seats are branded                    
with the Zoom logo, and that logo will need to be added at the Zoomfactory at a cost of $0.50 each for any                    
of these components that are outsourced. For all three components,75% of the fixed costs are avoidable, and                     
will be eliminated if the component's production is outsourced. Inaddition, seats and calipers are both                     
produced out of the same small factory space. If both seats andcalipers were outsourced, Zoom could lease                    
the space out and increase net income by $6,000 per year, whileeliminating all fixed costs for the two                    
components.                     
           

	Wheels	Seats	Calipers
Cost category
Direct materials	$138,000	$54,500	$87,500
Direct labor	97,000	71,500	44,500
Variable overhead	21,000	14,000	16,000
Fixed overhead	60,400	36,600	31,400
Total cost	$316,400	$176,600	$179,400
Units produced	40,000	20,000	80,000
Cost per unit	$7.91	$8.83	$2.24

Hints: Prepare incremental analyses for each componentseparately. Make wheels vs. buy wheels, etc. Since                    
there are additional implications to outsourcing both seats andcalipers, do a make vs. buy analysis assuming                    
both are outsourced. A correct solution, then, will likely have atleast four incremental analyses.