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.

Answer 1

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

Step-by-step 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

Answer 2

If Blue ridge decides to purchase the parts instead of manufacturing them, their total costs will increase by $21,300

Step-by-step 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