Bruin Manufacturing currently makes the 14,000 ball bearings it uses each year in its railroad car wheels.
There is no other use for these production facilities, nor is there a market for the depreciable items. Raider,
Inc., has just submitted a bid to manufacture the ball bearings for Bruin at a price of $11 per bearing. If Bruin
no longer makes the ball bearings, the product manager will lose his job. The standard cost card lists the
following costs of making one ball bearing:
Direct materials
$3
Direct labor
4
Variable overhead
9
Direct fixed overhead
5 (60% salary of product manager, 40% depreciation)
Non differential fixed overhead
11
Total cost
$ 32
Calculate the total relevant cost to make and buy the ball bearings.
Make
Buy
Total Cost $ $
