A company manufactures various sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $67 per unit (100 bottles), including fixed costs of $22 per unit. A proposal is offered to purchase small bottles from an outside source for $35 per unit, plus $5 per unit for freight. Prepare a differential analysis dated March 30 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles, assuming that fixed costs are unaffected by the decision. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Make Bottles (Alt. 1) or Buy Bottles (Alt. 2) March 30 Make Bottles (Alternative 1) Buy Bottles (Alternative 2) Differential Effect on Income (Alternative 2) Sales price $0 $0 $0 Unit Costs: Purchase price $fill in the blank 89d8f6f64ff1ff3_1 $fill in the blank 89d8f6f64ff1ff3_2 $fill in the blank 89d8f6f64ff1ff3_3 Delivery fill in the blank 89d8f6f64ff1ff3_4 fill in the blank 89d8f6f64ff1ff3_5 fill in the blank 89d8f6f64ff1ff3_6 Variable costs fill in the blank 89d8f6f64ff1ff3_7 fill in the blank 89d8f6f64ff1ff3_8 fill in the blank 89d8f6f64ff1ff3_9 Fixed factory overhead fill in the blank 89d8f6f64ff1ff3_10 fill in the blank 89d8f6f64ff1ff3_11 fill in the blank 89d8f6f64ff1ff3_12 Income (Loss) $fill in the blank 89d8f6f64ff1ff3_13 $fill in the blank 89d8f6f64ff1ff3_14 $fill in the blank 89d8f6f64ff1ff3_15 Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Make or Buy

A company manufactures various sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $67 per unit (100 bottles), including fixed costs of $22 per unit. A proposal is offered to purchase small bottles from an outside source for $35 per unit, plus $5 per unit for freight.

Prepare a differential analysis dated March 30 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles, assuming that fixed costs are unaffected by the decision. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis
Make Bottles (Alt. 1) or Buy Bottles (Alt. 2)
March 30
	Make Bottles (Alternative 1)	Buy Bottles (Alternative 2)	Differential Effect on Income (Alternative 2)
Sales price	$0	$0	$0
Unit Costs:
Purchase price	$fill in the blank 89d8f6f64ff1ff3_1	$fill in the blank 89d8f6f64ff1ff3_2	$fill in the blank 89d8f6f64ff1ff3_3
Delivery	fill in the blank 89d8f6f64ff1ff3_4	fill in the blank 89d8f6f64ff1ff3_5	fill in the blank 89d8f6f64ff1ff3_6
Variable costs	fill in the blank 89d8f6f64ff1ff3_7	fill in the blank 89d8f6f64ff1ff3_8	fill in the blank 89d8f6f64ff1ff3_9
Fixed factory overhead	fill in the blank 89d8f6f64ff1ff3_10	fill in the blank 89d8f6f64ff1ff3_11	fill in the blank 89d8f6f64ff1ff3_12
Income (Loss)	$fill in the blank 89d8f6f64ff1ff3_13	$fill in the blank 89d8f6f64ff1ff3_14	$fill in the blank 89d8f6f64ff1ff3_15

Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles.

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