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12 September, 02:39

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.

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  1. 12 September, 02:46
    0
    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
  2. 12 September, 02:48
    0
    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
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