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:

Overcrowding

A situation where too many individuals occupy a limited space, leading to potential stress, discomfort, and conflict.

Cross-Flows

Movements or exchanges of resources, information, or individuals between different sectors or groups, often enhancing diversity and innovation.

Queues

Lines or sequences of people or vehicles awaiting their turn to be attended to or to proceed.

Social Movements

Collective, organized efforts by groups of people to promote or resist change in society based on shared objectives and ideologies.