Make or Buy A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $168 per unit (100 bottles), including fixed costs of $31 per unit. A proposal is offered to purchase small bottles from an outside source for $98 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 8f0d72002061fde_1 $fill in the blank 8f0d72002061fde_2 $fill in the blank 8f0d72002061fde_3 Unit costs: Purchase price $fill in the blank 8f0d72002061fde_4 $fill in the blank 8f0d72002061fde_5 $fill in the blank 8f0d72002061fde_6 Freight fill in the blank 8f0d72002061fde_7 fill in the blank 8f0d72002061fde_8 fill in the blank 8f0d72002061fde_9 Variable costs fill in the blank 8f0d72002061fde_10 fill in the blank 8f0d72002061fde_11 fill in the blank 8f0d72002061fde_12 Fixed factory overhead fill in the blank 8f0d72002061fde_13 fill in the blank 8f0d72002061fde_14 fill in the blank 8f0d72002061fde_15 Income (Loss) $fill in the blank 8f0d72002061fde_16 $fill in the blank 8f0d72002061fde_17 $fill in the blank 8f0d72002061fde_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 $168 per unit (100 bottles), including fixed costs of $31 per unit. A proposal is offered to purchase small bottles from an outside source for $98 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 8f0d72002061fde_1	$fill in the blank 8f0d72002061fde_2	$fill in the blank 8f0d72002061fde_3
Unit costs:
Purchase price	$fill in the blank 8f0d72002061fde_4	$fill in the blank 8f0d72002061fde_5	$fill in the blank 8f0d72002061fde_6
Freight	fill in the blank 8f0d72002061fde_7	fill in the blank 8f0d72002061fde_8	fill in the blank 8f0d72002061fde_9
Variable costs	fill in the blank 8f0d72002061fde_10	fill in the blank 8f0d72002061fde_11	fill in the blank 8f0d72002061fde_12
Fixed factory overhead	fill in the blank 8f0d72002061fde_13	fill in the blank 8f0d72002061fde_14	fill in the blank 8f0d72002061fde_15
Income (Loss)	$fill in the blank 8f0d72002061fde_16	$fill in the blank 8f0d72002061fde_17	$fill in the blank 8f0d72002061fde_18

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

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