Down hill all the way, inc. produces bicycles. in its current manufacturing environment, down hill makes all of the wheels used in production. down hill’s annual costs related to the production of 100,000 wheels are as follows: direct materials $30,000 direct labor $50,000 variable overhead $20,000 fixed overhead $70,000 an outside supplier has offered to sell down hill similar wheels for $1.25 per wheel. if the wheels are purchased from the outside supplier, $15,000 of annual fixed overhead could be avoided and the new facilities now being used could be rented to another company for $45,000 per year. what is the highest price that down hill could pay the outside supplier for the wheel and be economically indifferent between making or buying the wheels?

The maximum price is $1.6

Explanation:

Giving the following information:

Down Hill’s annual costs related to the production of 100,000 wheels are as follows: Direct Materials $30,000 Direct Labor $50,000 Variable Overhead $20,000 Fixed Overhead $70,000 An outside supplier has offered to sell Down Hill similar wheels for $1.25 per wheel. If the wheels are purchased from the outside supplier, $15,000 of annual fixed overhead could be avoided and the new facilities now being used could be rented to another company for $45,000 per year.

Make in house:

Variable costs= 100,000

Avoidable overhead= 15,000

Rent lost= 45,000

Total= 160,000

Unitary cost= 160,000/100,000= $1.6

The maximum price is $1.6

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.

answer: b) the us is the leading importer but not the leading exporter.

extra info:

the u.s is the largest importer but it is not the largest exporter as china sits on the top of the table when it comes to leading exporters.

but u.s is not far from first,

they rank in 2nd globally as the worlds largest exporter.

happy to

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