(c) Would your answer be different in (b) if the productive capacity released by not making the finials could be used to produce income of $35,300? Prepare the incremental analysis to show the result. Total annual cost $ Opportunity cost Total cost $ Make $ Buy $ Net Income Increase (Decrease) $ 7845 Ivanhoe Ranch Inc. has been manufacturing its own finials for its curtain rods. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 61% of direct labor cost. The direct materials and direct labor cost per unit to make a pair of finials are $4 and $5, respectively. Normal production is 32,300 curtain rods per year. A supplier offers to make a pair of finials at a price of $12.90 per unit. If Ivanhoe Ranch accepts the supplier's offer, all variable manufacturing costs will be eliminated, but the $46,500 of fixed manufacturing overhead currently being charged to the finials will have to be absorbed by other products.

(c) Would your answer be different in (b) if the productive capacity released by not making the finials could be used to produce income of $35,300? Prepare the incremental analysis to show the result. Total annual cost $ Opportunity cost Total cost $ Make $ Buy $ Net Income Increase (Decrease) $ 7845 Ivanhoe Ranch Inc. has been manufacturing its own finials for its curtain rods. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 61% of direct labor cost. The direct materials and direct labor cost per unit to make a pair of finials are $4 and $5, respectively. Normal production is 32,300 curtain rods per year. A supplier offers to make a pair of finials at a price of $12.90 per unit. If Ivanhoe Ranch accepts the supplier's offer, all variable manufacturing costs will be eliminated, but the $46,500 of fixed manufacturing overhead currently being charged to the finials will have to be absorbed by other products.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 7EA: Flanders Manufacturing is considering purchasing a new machine that will reduce variable costs per...

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