ABC Company has been maaufacturing its own products. The company is currently operating at 100% of capacity, and fixed manufacturing overhead is 105000. The direct materials and direct labor cost per unit to make the products are $4 and $5 respectively. Normal production is 30,000 units per year. A supplier offers to make the product at a price of $12.75 per unit. If ABC Company. accepts the supplier's offer, all variable manufacturing costs will be eliminated, but the $45,000 of fixed manufacturing overhead currently being charged to the product will have to be absorbed by other products. 3. Prepare the incremental analysis for the decision to make or buy the products. 4. Should ABC company make or buy the products.

ABC Company has been maaufacturing its own products. The company is currently operating at 100% of capacity, and fixed manufacturing overhead is 105000. The direct materials and direct labor cost per unit to make the products are $4 and $5 respectively. Normal production is 30,000 units per year. A supplier offers to make the product at a price of $12.75 per unit. If ABC Company. accepts the supplier's offer, all variable manufacturing costs will be eliminated, but the $45,000 of fixed manufacturing overhead currently being charged to the product will have to be absorbed by other products. 3. Prepare the incremental analysis for the decision to make or buy the products. 4. Should ABC company make or buy the products.

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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