Answer:
If Blue ridge decides to purchase the parts instead of manufacturing them, their total costs will increase by $21,300
Explanation:
currently Blue Ridge's costs are:
variable costs = $69,000
fixed costs = $69,000
total $138,000
total cost per unit = $138,000 / 45,000 units = $3.0667 per unit
if Blue Ridge decide to outsource the production of the parts:
variable costs = 45,000 x $4 = $180,000
decrease in fixed costs = $69,000 x -30% = -$20,700
total costs = $159,300
If Blue ridge decides to purchase the parts instead of manufacturing them, their total costs will increase by ⇒ $159,300 - $138,000 = $21,300
Answer:
hi your question is incomplete here is the complete question
Blue ridge bicycles uses a standard part in the manufacture of several of its bikes. the cost of producing 45 comma 000 parts is $ 138 comma 000, which includes fixed costs of $ 69 comma 000 and variable costs of $ 69 comma 000. the company can buy the part from an outside supplier for $ 4.00 per unit, and avoid 30% of the fixed costs. what will be the operating income if Blue Ridge makes the parts.
Answer : $85800
Explanation:
number of units produced = 45000
total cost = $138000
fixed cost = $69000
variable cost = $69000
cost per unit of production = variable cost / number of units produced
= $69000 / 45000 = $1.53
when the company decides to purchase the part
variable cost = cost per unit ( $4) * number of units ( 45000)
= $180000
fixed cost = $69000 - ( 30% of $69000)
= $69000 - $20700 = $43800
therefore total cost = $43800 + $180000 = $223800
therefore the
operating income if Blue ridge produces the parts will be = $223800 - $138000 = $85800
