Make or Buy A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $164 per unit (100 bottles), including fixed costs of $30 per unit. A proposal is offered to purchase small bottles from an outside source for $100 per unit, plus $12 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 $fill in the blank f78809011fa0fac_1 $fill in the blank f78809011fa0fac_2 $fill in the blank f78809011fa0fac_3 Unit costs: Purchase price $fill in the blank f78809011fa0fac_4 $fill in the blank f78809011fa0fac_5 $fill in the blank f78809011fa0fac_6 Freight fill in the blank f78809011fa0fac_7 fill in the blank f78809011fa0fac_8 fill in the blank f78809011fa0fac_9 Variable costs fill in the blank f78809011fa0fac_10 fill in the blank f78809011fa0fac_11 fill in the blank f78809011fa0fac_12 Fixed factory overhead fill in the blank f78809011fa0fac_13 fill in the blank f78809011fa0fac_14 fill in the blank f78809011fa0fac_15 Income (Loss) $fill in the blank f78809011fa0fac_16 $fill in the blank f78809011fa0fac_17 $fill in the blank f78809011fa0fac_18 b. 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 $164 per unit (100 bottles), including fixed costs of $30 per unit. A proposal is offered to purchase small bottles from an outside source for $100 per unit, plus $12 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	$fill in the blank f78809011fa0fac_1	$fill in the blank f78809011fa0fac_2	$fill in the blank f78809011fa0fac_3
Unit costs:
Purchase price	$fill in the blank f78809011fa0fac_4	$fill in the blank f78809011fa0fac_5	$fill in the blank f78809011fa0fac_6
Freight	fill in the blank f78809011fa0fac_7	fill in the blank f78809011fa0fac_8	fill in the blank f78809011fa0fac_9
Variable costs	fill in the blank f78809011fa0fac_10	fill in the blank f78809011fa0fac_11	fill in the blank f78809011fa0fac_12
Fixed factory overhead	fill in the blank f78809011fa0fac_13	fill in the blank f78809011fa0fac_14	fill in the blank f78809011fa0fac_15
Income (Loss)	$fill in the blank f78809011fa0fac_16	$fill in the blank f78809011fa0fac_17	$fill in the blank f78809011fa0fac_18

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

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