A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $168 per unit (100 bottles), including fixed costs of $33 per unit. A proposal is offered to purchase small bottles from an outside source for $95 per unit, plus $9 per unit for freight. a. Prepare a differential analysis dated July 31 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles, assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0". Use a minus sign to indicate a loss. Differential Analysis Make Bottles (Alt. 1) or Buy Bottles (Alt. 2) July 31 Make Bottles (Alternative 1) Buy Bottles (Alternative 2) Differential Effect on Income (Alternative 2) Sales price $ $ $ Unit costs: Purchase price $ $ $ Freight Variable costs Fixed factory overhead Income (Loss) $ $ $ b. Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles.
A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $168 per unit (100 bottles), including fixed costs of $33 per unit. A proposal is offered to purchase small bottles from an outside source for $95 per unit, plus $9 per unit for freight. a. Prepare a differential analysis dated July 31 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles, assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0". Use a minus sign to indicate a loss. Differential Analysis Make Bottles (Alt. 1) or Buy Bottles (Alt. 2) July 31 Make Bottles (Alternative 1) Buy Bottles (Alternative 2) Differential Effect on Income (Alternative 2) Sales price $ $ $ Unit costs: Purchase price $ $ $ Freight Variable costs Fixed factory overhead Income (Loss) $ $ $ b. Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles.
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
a. Prepare a differential analysis dated July 31 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles, assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0". Use a minus sign to indicate a loss.
| Differential Analysis | |||
| Make Bottles (Alt. 1) or Buy Bottles (Alt. 2) | |||
| July 31 | |||
| Make Bottles (Alternative 1) | Buy Bottles (Alternative 2) | Differential Effect on Income (Alternative 2) | |
| Sales price | $ | $ | $ |
| Unit costs: | |||
| Purchase price | $ | $ | $ |
| Freight | |||
| Variable costs | |||
| Fixed factory |
|||
| Income (Loss) | $ | $ | $ |
b. Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles.
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