Steeple Rides makes bicycles. It has always purchased its bicycle tires from the Balyo Tires at $15 each but is currently considering making the tires in its own factory. The estimated costs per unit of making the tires are as follows:

Direct materials ................................................$4

Direct labor ........................................................$5

Variable manufacturing overhead ..................$2

The company's fixed expenses would increase by $38,000 per year if managers decided to make the tire.

Required

a. Ignoring qualitative factors, if the company needs 8,000 tires a year, should it continue to purchase them from Balyo or begin to produce them internally?

b. What qualitative factors should Steeple Rides consider in making this decision?