Homework Help is Here – Start Your Trial Now!
Business
Accounting
avoid 30% of the fixed costs. Assume that factory space freed up by purchasing the part from an outside source can be use to manufacture another product that can be sold for $12,000 profit. If Cuyahoga Valley Bicycle makes the part instead of buying the part, what will the difference in operating income be? Should the company make or buy the part? Show your work.

avoid 30% of the fixed costs. Assume that factory space freed up by purchasing the part from an outside source can be use to manufacture another product that can be sold for $12,000 profit. If Cuyahoga Valley Bicycle makes the part instead of buying the part, what will the difference in operating income be? Should the company make or buy the part? Show your work.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question
Please help me with show all calculation thanku
Cuyahoga Valley Bicycles uses a standard part in the manufacture of several of its bikes. The cost of producing 40,000 parts is $138,000, which includes fixed costs of $68,000 and variable costs of $70,000. The company can buy the part from an outside supplier for $3.00 per unit, and avoid 30% of the fixed costs. Assume that factory space freed up by purchasing the part from an outside source can be used to manufacture another product that can be sold for $12,000 profit. If Cuyahoga Valley Bicycles makes the part instead of buying the part, what will the difference in operating income be? Should the company make or buy the part? Show your work.
Transcribed Image Text:Cuyahoga Valley Bicycles uses a standard part in the manufacture of several of its bikes. The cost of producing 40,000 parts is $138,000, which includes fixed costs of $68,000 and variable costs of $70,000. The company can buy the part from an outside supplier for $3.00 per unit, and avoid 30% of the fixed costs. Assume that factory space freed up by purchasing the part from an outside source can be used to manufacture another product that can be sold for $12,000 profit. If Cuyahoga Valley Bicycles makes the part instead of buying the part, what will the difference in operating income be? Should the company make or buy the part? Show your work.
Expert Solution
steps

Step by step

Solved in 3 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS