Make or BuyA company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $140 per unit (100 bottles), including fixed costs of $30 per unit. A proposal is offered to purchase small bottles from an outside source for $96 per unit, plus $11 per unit for freight.a. Prepare a differential analysis dated July 31 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles, assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0". Use a minus sign to indicate a loss.Differential AnalysisMake Bottles (Alt. 1) or Buy Bottles (Alt. 2)July 31 Make Bottles (Alternative 1)Buy Bottles (Alternative 2)Differential Effect on Income (Alternative 2)Sales price$fill in the blank 7f88cdf82f9e007_1$fill in the blank 7f88cdf82f9e007_2$fill in the blank 7f88cdf82f9e007_3Unit costs: Purchase price$fill in the blank 7f88cdf82f9e007_4$fill in the blank 7f88cdf82f9e007_5$fill in the blank 7f88cdf82f9e007_6Freightfill in the blank 7f88cdf82f9e007_7fill in the blank 7f88cdf82f9e007_8fill in the blank 7f88cdf82f9e007_9Variable costsfill in the blank 7f88cdf82f9e007_10fill in the blank 7f88cdf82f9e007_11fill in the blank 7f88cdf82f9e007_12Fixed factory overheadfill in the blank 7f88cdf82f9e007_13fill in the blank 7f88cdf82f9e007_14fill in the blank 7f88cdf82f9e007_15Income (Loss)$fill in the blank 7f88cdf82f9e007_16$fill in the blank 7f88cdf82f9e007_17$fill in the blank 7f88cdf82f9e007_18b. Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles.

Under make or buy decision making, we should choose that alternative which has less cost.

Answered: Make or Buy A company manufactures…

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 $140 per unit (100 bottles), including fixed costs of $30 per unit. A proposal is offered to purchase small bottles from an outside source for $96 per unit, plus $11 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 7f88cdf82f9e007_1	$fill in the blank 7f88cdf82f9e007_2	$fill in the blank 7f88cdf82f9e007_3
Unit costs:
Purchase price	$fill in the blank 7f88cdf82f9e007_4	$fill in the blank 7f88cdf82f9e007_5	$fill in the blank 7f88cdf82f9e007_6
Freight	fill in the blank 7f88cdf82f9e007_7	fill in the blank 7f88cdf82f9e007_8	fill in the blank 7f88cdf82f9e007_9
Variable costs	fill in the blank 7f88cdf82f9e007_10	fill in the blank 7f88cdf82f9e007_11	fill in the blank 7f88cdf82f9e007_12
Fixed factory overhead	fill in the blank 7f88cdf82f9e007_13	fill in the blank 7f88cdf82f9e007_14	fill in the blank 7f88cdf82f9e007_15
Income (Loss)	$fill in the blank 7f88cdf82f9e007_16	$fill in the blank 7f88cdf82f9e007_17	$fill in the blank 7f88cdf82f9e007_18

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

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