A U.S. motorcycle manufacturer has the option of either making the tires in their newly designed motorcycle, or subcontracting it out to a manufacturer from Singapore. Costs for the two options are:
$\begin{array}{|l|c|c|}
\hline \text { Source } & \text { Fixed Cost } & \text { Variable Cost } \
\hline \text { Make in-house } & \$ 15,000 & \$ 21.50 \
\hline \text { Buy from Singapore } & \$ 0 & \$ 29.00 \
\hline
\end{array}$
a.Which option would be preferred at an annual volume of 3,000 tires?
b.Which option would be preferred at an annual volume of 5,000 tires?
c.For what range of production volume would it be better to make the tires in-house?

Question

A U.S. motorcycle manufacturer has the option of either making the tires in their newly designed motorcycle, or subcontracting it out to a manufacturer from Singapore. Costs for the two options are:
 $\begin{array}{|l|c|c|}
\hline \text { Source } & \text { Fixed Cost } & \text { Variable Cost } \
\hline \text { Make in-house } & \$ 15,000 & \$ 21.50 \
\hline \text { Buy from Singapore } & \$ 0 & \$ 29.00 \
\hline
\end{array}$ 
a.Which option would be preferred at an annual volume of 3,000 tires?
b.Which option would be preferred at an annual volume of 5,000 tires?
c.For what range of production volume would it be better to make the tires in-house?

Quizplus · Accepted Answer

The Answer of A U.S. motorcycle manufacturer has the option of either making the tires in their newly designed motorcycle, or subcontracting it out to a manufacturer from Singapore. Costs for the two options are:
 $\begin{array}{|l|c|c|}
\hline \text { Source } & \text { Fixed Cost } & \text { Variable Cost } \
\hline \text { Make in-house } & \$ 15,000 & \$ 21.50 \
\hline \text { Buy from Singapore } & \$ 0 & \$ 29.00 \
\hline
\end{array}$ 
a.Which option would be preferred at an annual volume of 3,000 tires?
b.Which option would be preferred at an annual volume of 5,000 tires?
c.For what range of production volume would it be better to make the tires in-house?

A US Motorcycle Manufacturer Has the Option of Either Making the the Tires