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

question 39

Essay

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?

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Definitions:

Trousers

Clothing items worn from the waist to anywhere between the knees and the feet, covering each leg separately.

L.E.D. Signs

Electronic displays that use light-emitting diodes to create text, images, or video messages, commonly used for advertising or information dissemination.

Risk of Loss

Refers to the exposure to harm or danger that may result in loss, often considered in the context of contracts or insurance.

Destroyed

To damage something so badly that it no longer exists or cannot be repaired.