Question

Bramble Rides makes bicycles. It has always purchased its bicycle tires from the Balyo Tires at $10 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		$2

The company’s fixed expenses would increase by $28,630 per year if managers decided to make the tire.

(a1) Calculate total relevant cost to make or buy if the company needs 5,210 tires a year.

Total Relevant Costs Are?

Make $____

Buy $___

Answer 1

Answers : Total Relevant Costs Are.

Make $80730

Buy $52100

Calculated as

Total Cost if Making
Relevant cost
	Unit Cost		Units		Total Cost
Direct material	3	x	5210	=	$    15,630
Direct Labor	5	x	5210	=	$    26,050
Variable Manufacturing overhead	2	x	5210	=	$    10,420
Fixed cost additional					$    28,630
Total relevant cost of special order					$    80,730
Total Cost if Buying
	Unit Cost		Units		Total Cost
Cost of Buying	10	x	5210	=	52100