Ace Bicycle Company Case Study - Accounting and Finance Assignment Help

Assignment Task:

REQUIRED

1. Assume that if Ace purchases the chains from the outside supplier, the facility where the chains are currently made will remain idle. Should Ace accept the outside supplier’s offer at the anticipated production (and sales) volume of 10,000 units. ?

2. For this question, assume that if the chains are purchased outside, the facilities where the chains are currently made will be used to upgrade the bicycles by adding mud flaps and reflectors.  As a consequence, the selling price on bicycles will be raised by $ 20. The variable per unit cost of the upgrade would be $ 18, and additional tooling costs of  $ 16,000 would be incurred.  Should Ace make or buy the chains, assuming that 10,000 units are produced (and sold) ?

3.  The sales manager at Ace is concerned that the estimate of 10,000 units may be high and believes that only 6,200 units will be sold.  Production will be cut back, and this opens up workspace, which can be used to add the mud flaps and reflectors whether Ace goes outside  for the chains or  makes them in-house.  At this lower output, Ace will produce the chains in eight batches of 775 units each.  Should Ace purchase the chains from the outside vendor?

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