Make or Buy A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $144 per unit (100 bottles), including fixed costs of $31 per unit. A proposal is offered to purchase small bottles from an outside source for $99 per unit, plus $7 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 e2d948f7d021ffe_1 $fill in the blank e2d948f7d021ffe_2 $fill in the blank e2d948f7d021ffe_3 Unit costs:       Purchase price $fill in the blank e2d948f7d021ffe_4 $fill in the blank e2d948f7d021ffe_5 $fill in the blank e2d948f7d021ffe_6 Freight fill in the blank e2d948f7d021ffe_7 fill in the blank e2d948f7d021ffe_8 fill in the blank e2d948f7d021ffe_9 Variable costs fill in the blank e2d948f7d021ffe_10 fill in the blank e2d948f7d021ffe_11 fill in the blank e2d948f7d021ffe_12 Fixed factory overhead fill in the blank e2d948f7d021ffe_13 fill in the blank e2d948f7d021ffe_14 fill in the blank e2d948f7d021ffe_15 Income (Loss) $fill in the blank e2d948f7d021ffe_16 $fill in the blank e2d948f7d021ffe_17 $fill in the blank e2d948f7d021ffe_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
icon
Related questions
Question

Make or Buy

A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $144 per unit (100 bottles), including fixed costs of $31 per unit. A proposal is offered to purchase small bottles from an outside source for $99 per unit, plus $7 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 e2d948f7d021ffe_1 $fill in the blank e2d948f7d021ffe_2 $fill in the blank e2d948f7d021ffe_3
Unit costs:      
Purchase price $fill in the blank e2d948f7d021ffe_4 $fill in the blank e2d948f7d021ffe_5 $fill in the blank e2d948f7d021ffe_6
Freight fill in the blank e2d948f7d021ffe_7 fill in the blank e2d948f7d021ffe_8 fill in the blank e2d948f7d021ffe_9
Variable costs fill in the blank e2d948f7d021ffe_10 fill in the blank e2d948f7d021ffe_11 fill in the blank e2d948f7d021ffe_12
Fixed factory overhead fill in the blank e2d948f7d021ffe_13 fill in the blank e2d948f7d021ffe_14 fill in the blank e2d948f7d021ffe_15
Income (Loss) $fill in the blank e2d948f7d021ffe_16 $fill in the blank e2d948f7d021ffe_17 $fill in the blank e2d948f7d021ffe_18

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

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Relevant cost analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education