Let\'s Roll, Inc. currently manufactures the wheels that it uses for its in-line

Question

Let's Roll, Inc. currently manufactures the wheels that it uses for its in-line skates. The annual costs to manufacture the 140,000 wheels needed each year are as follows:

Wheeling Company has offered to provide Let's Roll with all of its annual wheel needs for $3.40 per wheel. If Let's Roll accepts this offer, 65% of the fixed overhead above could be totally eliminated. Also, Let's Roll would be able to rent out the freed up space and could generate $78,000 of income annually.

Let's Roll, Inc. currently manufactures the wheels that it uses for its in-line skates. The annual costs to manufacture the 140,000 wheels needed each year are as follows:

Explanation / Answer

solution :

a. cost of making   Direct material 167000   Direct labor 48000   Variable overhead 54000   Fixed overhead 300000   Total 569000 b. cost of buy Purchase cost (140000*3.4) 476000 fixed cost (300000*.35) 105000 Rent income -78000 total 503000 c. Lets Roll should buy as it has lower cost compared to making.

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.