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Riverbed Rides makes bicycles. It has always purchased its bicycle tires from the Balyo Tires at $11 each but is currently considering making the...

Riverbed 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$4


Direct labor$5


Variable manufacturing overhead$2



The company's fixed expenses would increase by $28,190 per year if managers decided to make the tire.


(a1) Calculate total relevant cost to make or buy if the company needs 5,860 tires a year.




(a2) Ignoring qualitative factors, if the company needs 5,860 tires a year, should it continue to purchase them from Balyo or begin to produce them internally?


The company  ________ to purchase the tires.


should continue/ should not continue

Top Answer

1 total relevant cost make... View the full answer

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Other Answers

Part A Make Decision Total costs will be VC+FC (4+5+2)* 5860+$28,190... View the full answer

1 comment
  • all the best dear
    • kerryliz
    • May 01, 2018 at 11:31am

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